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Read the following information and answer the given questions:
Charan Ltd. took over Assets of ₹6,00,000 and Liabilities of ₹40,000 of Paras Ltd. at an agreed value of ₹6,30,000. Charan Ltd. issued 10% Debentures of ₹100 each at a discount of 10% to Paras Ltd. in full satisfaction of the price. Charan Ltd. writes off any capital losses incurred during a year, at the end of that financial year.
Q. In which account is the difference between the assets and liabilities taken over and the payment made be transferred to?
- a)General Reserve
- b)Debenture Redemption Reserve
- c)Capital Reserve
- d)Goodwill
Correct answer is option 'D'. Can you explain this answer?
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Read the following information and answer the given questions:Charan ...
Goodwill is an intangible asset that is associated with the purchase of one company by another. Specifically, goodwill is the portion of the purchase price that is higher than the sum of the net fair value of all of the assets purchased in the acquisition and the liabilities assumed in the process.
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Read the following information and answer the given questions:Charan ...
Understanding the Transaction
Charan Ltd. acquired assets and assumed liabilities of Paras Ltd. The key figures in this transaction are:
- Assets Taken Over: ₹6,00,000
- Liabilities Assumed: ₹40,000
- Net Assets: ₹6,00,000 - ₹40,000 = ₹5,60,000
- Agreed Value: ₹6,30,000
Calculation of Difference
The difference between the agreed value and the net assets is calculated as follows:
- Difference: ₹6,30,000 - ₹5,60,000 = ₹70,000
This difference represents the excess amount that Charan Ltd. is paying over the net assets taken from Paras Ltd.
Accounting Treatment of the Difference
In accounting, when a company pays more for the assets than their net book value, this excess amount is recognized as goodwill. Goodwill is an intangible asset that represents the value of a company's brand, customer relationships, and other non-physical assets.
- Goodwill Recognition: The ₹70,000 difference will be recorded as goodwill in the books of Charan Ltd.
Conclusion
Thus, the correct account to transfer the difference between the assets and liabilities taken over and the payment made is:
- Goodwill (Option D)
This treatment aligns with accounting principles where goodwill arises from acquiring a business at a premium over its net tangible assets.
Charan Ltd. acquired assets and assumed liabilities of Paras Ltd. The key figures in this transaction are:
- Assets Taken Over: ₹6,00,000
- Liabilities Assumed: ₹40,000
- Net Assets: ₹6,00,000 - ₹40,000 = ₹5,60,000
- Agreed Value: ₹6,30,000
Calculation of Difference
The difference between the agreed value and the net assets is calculated as follows:
- Difference: ₹6,30,000 - ₹5,60,000 = ₹70,000
This difference represents the excess amount that Charan Ltd. is paying over the net assets taken from Paras Ltd.
Accounting Treatment of the Difference
In accounting, when a company pays more for the assets than their net book value, this excess amount is recognized as goodwill. Goodwill is an intangible asset that represents the value of a company's brand, customer relationships, and other non-physical assets.
- Goodwill Recognition: The ₹70,000 difference will be recorded as goodwill in the books of Charan Ltd.
Conclusion
Thus, the correct account to transfer the difference between the assets and liabilities taken over and the payment made is:
- Goodwill (Option D)
This treatment aligns with accounting principles where goodwill arises from acquiring a business at a premium over its net tangible assets.
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Read the following information and answer the given questions:Charan Ltd. took over Assets of ₹6,00,000 and Liabilities of ₹40,000 of Paras Ltd. at an agreed value of ₹6,30,000. Charan Ltd. issued 10% Debentures of ₹100 each at a discount of 10% to Paras Ltd. in full satisfaction of the price. Charan Ltd. writes off any capital losses incurred during a year, at the end of that financial year.Q. In which account is the difference between the assets and liabilities taken over and the payment made be transferred to?a)General Reserveb)Debenture Redemption Reservec)Capital Reserved)GoodwillCorrect answer is option 'D'. Can you explain this answer?
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Read the following information and answer the given questions:Charan Ltd. took over Assets of ₹6,00,000 and Liabilities of ₹40,000 of Paras Ltd. at an agreed value of ₹6,30,000. Charan Ltd. issued 10% Debentures of ₹100 each at a discount of 10% to Paras Ltd. in full satisfaction of the price. Charan Ltd. writes off any capital losses incurred during a year, at the end of that financial year.Q. In which account is the difference between the assets and liabilities taken over and the payment made be transferred to?a)General Reserveb)Debenture Redemption Reservec)Capital Reserved)GoodwillCorrect answer is option 'D'. Can you explain this answer? for Commerce 2024 is part of Commerce preparation. The Question and answers have been prepared according to the Commerce exam syllabus. Information about Read the following information and answer the given questions:Charan Ltd. took over Assets of ₹6,00,000 and Liabilities of ₹40,000 of Paras Ltd. at an agreed value of ₹6,30,000. Charan Ltd. issued 10% Debentures of ₹100 each at a discount of 10% to Paras Ltd. in full satisfaction of the price. Charan Ltd. writes off any capital losses incurred during a year, at the end of that financial year.Q. In which account is the difference between the assets and liabilities taken over and the payment made be transferred to?a)General Reserveb)Debenture Redemption Reservec)Capital Reserved)GoodwillCorrect answer is option 'D'. Can you explain this answer? covers all topics & solutions for Commerce 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Read the following information and answer the given questions:Charan Ltd. took over Assets of ₹6,00,000 and Liabilities of ₹40,000 of Paras Ltd. at an agreed value of ₹6,30,000. Charan Ltd. issued 10% Debentures of ₹100 each at a discount of 10% to Paras Ltd. in full satisfaction of the price. Charan Ltd. writes off any capital losses incurred during a year, at the end of that financial year.Q. In which account is the difference between the assets and liabilities taken over and the payment made be transferred to?a)General Reserveb)Debenture Redemption Reservec)Capital Reserved)GoodwillCorrect answer is option 'D'. Can you explain this answer?.
Read the following information and answer the given questions:Charan Ltd. took over Assets of ₹6,00,000 and Liabilities of ₹40,000 of Paras Ltd. at an agreed value of ₹6,30,000. Charan Ltd. issued 10% Debentures of ₹100 each at a discount of 10% to Paras Ltd. in full satisfaction of the price. Charan Ltd. writes off any capital losses incurred during a year, at the end of that financial year.Q. In which account is the difference between the assets and liabilities taken over and the payment made be transferred to?a)General Reserveb)Debenture Redemption Reservec)Capital Reserved)GoodwillCorrect answer is option 'D'. Can you explain this answer? for Commerce 2024 is part of Commerce preparation. The Question and answers have been prepared according to the Commerce exam syllabus. Information about Read the following information and answer the given questions:Charan Ltd. took over Assets of ₹6,00,000 and Liabilities of ₹40,000 of Paras Ltd. at an agreed value of ₹6,30,000. Charan Ltd. issued 10% Debentures of ₹100 each at a discount of 10% to Paras Ltd. in full satisfaction of the price. Charan Ltd. writes off any capital losses incurred during a year, at the end of that financial year.Q. In which account is the difference between the assets and liabilities taken over and the payment made be transferred to?a)General Reserveb)Debenture Redemption Reservec)Capital Reserved)GoodwillCorrect answer is option 'D'. Can you explain this answer? covers all topics & solutions for Commerce 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Read the following information and answer the given questions:Charan Ltd. took over Assets of ₹6,00,000 and Liabilities of ₹40,000 of Paras Ltd. at an agreed value of ₹6,30,000. Charan Ltd. issued 10% Debentures of ₹100 each at a discount of 10% to Paras Ltd. in full satisfaction of the price. Charan Ltd. writes off any capital losses incurred during a year, at the end of that financial year.Q. In which account is the difference between the assets and liabilities taken over and the payment made be transferred to?a)General Reserveb)Debenture Redemption Reservec)Capital Reserved)GoodwillCorrect answer is option 'D'. Can you explain this answer?.
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