Model: Debtors and creditors taken over by the Company Sun Ltd. acquired the business of Moon Agencies, whose debtors and creditors were taken over by the Company for collection and payment for a commission of 10% on all amount collected and 2% on amount paid. The debtors amounted to Rs.4,50,000 and creditors to Rs.2,20,000. There was a contingent liability of Rs.60,000
The Company collected one-third of debtors in full, 50% of debtors at 4% discount, two-thirds of the balance at 6% discount and the remaining proved bad. A debt of Rs.30,000 written off by the vendor in the past was collected at 80% but court expenses for that amounted to Rs.6,000 of which Rs.2,000 only could be recovered from the debtor.
Rs.20,000 of creditors were paid in full and the balance was paid at 97%. The contingent liability came up for payment at Rs.40,000. The Company settled its account with the vendor in cash. You are required to pass journal entries in the books of Sun Ltd.