Question

Beeta Ltd, issued 5,000, $9\%$ debentures of Rs 500 each. Pass the necessary journal entries for the issue of Debentures in the books of the company in the following cases:

(i) When debentures are issued at $10\%$ premium and redeemable at par.

(ii) When debentures are issued at par and redeemable at $10\%$ premium.

(iii) When debentures are issued at $5\%$ premium and redeemable at $10\%$ premium.

(iv) When debentures are issued at $25\%$ to the vendors for machinery purchased for Rs 6,25,000.

Answer 1

$\begin{array}{cccccc}\text{Date}& \text{Particulars}& & \text{L.F}& \text{Dr (Rs)}& \text{Cr. (Rs)}\\ \text{Case (i)}& \text{Bank A/c}& \text{Dr}& & 27,50,000& \\ & \text{To Debentures Application and Allotment A/c}& & & & 27,50,000\\ & \text{(Debenture application money received)}& & & & \\ & \text{Debenture Application and Allotment A/c}& \text{Dr}& & 27,50,000& \\ & \text{To}9\%\text{Debenture A/c}& & & & 25,00,000\\ & \text{To Securities Premium Reserve A/c}& & & & 2,50,000\\ & \text{(Debentures issued at a premium of}10\%)& & & & \\ \text{Case (ii)}& \text{Bank}& \text{Dr}& & 25,00,000& \\ & \text{To Debentures Application and Allotment A/c}& & & & 25,00,000\\ & \text{(Debenture application money received)}& & & & \\ & \text{Debenture Application and Allotment A/c}& \text{Dr}& & 25,00,000& \\ & \text{Loss on issue of Debentures A/c}& \text{Dr}& & 2,50,000& \\ & \text{To}9\%\text{Debenture A/c}& & & & 25,00,000\\ & \text{To Premium on Redemption of Debentures A/c}& & & & 2,50,000\\ & \text{(Debentures issued at par, redeemable at a}& & & & \\ & \text{premium of}10\%& & & & \\ \text{Case (iii)}& \text{Bank}& \text{Dr}& & 26,25,000& \\ & \text{To Debentures Application and Allotment A/c}& & & & 26,25,000\\ & \text{(Debenture application money received)}& & & & \\ & \text{Debenture Application and Allotment A/c}& \text{Dr}& & 26,25,000& \\ & \text{Loss on issue of Debentures A/c}& \text{Dr}& & 2,50,000& \\ & \text{To}9\%\text{Debenture A/c}& & & & 25,00,000\\ & \text{To Securities Premium Reserve A/c}& & & & 1,25,000\\ & \text{To Premium on Redemption of Debenture A/c}& & & & 2,50,000\\ & \text{(Debentures issued at a premium of}5\%& & & & \\ & \text{redeemable at a premium of}10\%)& & & & \\ \text{Case (iv)}& \text{Machinery A/c}& \text{Dr}& & 6,25,000& \\ & \text{To Vendors}& & & & 6,25,000\\ & \text{(Machinery purchased)}& & & & \\ & \text{Vendors}& \text{Dr}& & 6,25,000& \\ & \text{To}9\%\text{Debenture A/c}& & & & 5,00,000\\ & \text{To Securities Premium Reserve A/c}& & & & 1,25,000\\ & \text{(Issue of 1,000 Debentures of Rs 500 each at}25\%& & & & \\ & \text{premium calculated as}\frac{6,25,000}{625\ast }=1,000)& & & & \end{array}$

* Issue price of Debenture is Rs 500 + $25\%$ Premium = Rs 625.