On April 01, 2014, a company made an issue of 5,000, 8% debentures of Rs 100 each at Rs 94 per debentures. The terms of issue provided for the redemption of 1,000 debenture every year starting from March 31, 2016 either by purchase from open market or by converting them into Equity shares of Rs 10 each at a premium of Rs 2.50 per share. On March 31, 2016, the company redeemed 1,000 debentures by converting them into equity shares. Give the necessary journal entries.

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Solution

Journal Entries

Date

Particulars

L.F.

Dr. Rs.

Cr. Rs.

2014

April 1

Bank A/c

Dr.

4,70,000

To Debenture Application A/c

4,70,000

(Being application money on 5000 debentures received @ Rs.94 each)

April 1

Debenture Application A/c

Dr.

4,70,000

Discount on issue of debentures A/c

Dr.

30,000

To 8% Debentures A/c

5,00,000

2016

March 31

8% Debentures A/c

Dr.

1,00,000

To Debenture holders’ A/c

1,00,000

(Being redemption of first 1000 debentures due)

March 31

Debenture holders’ A/c

Dr.

1,00,000

To Share Capital A/c

80,000

To Securities Premium Reserve A/c

20,000

(Being 8000 shares issued against conversion debentures.)

$No . of Shares Issued = \frac{Redeemable Value of Debentures}{Issue Price} = \frac{1, 00, 000}{12.5} = 8, 000 shares at Rs 10 each$

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Similar questions

Q. Pass necessary journal entries in the following cases :
(i)

Z

Ltd redeemed

1500

12 %

debentures of Rs

100

each issued at a discount of

6 %

by converting them into equity shares of Rs

100

each issued at a premium of Rs

25

per share.
(ii)

X

Ltd. converted

1, 000, 12 %

debentures of Rs

100

each issued at a discount of Rs

10

per debenture into equity shares of Rs

100

each Rs

90

paid up.

Z.Ltd. redeemed 2,000, 12% debentures of Rs.100 each which were issued at a discount of 5%, by converting them into equity shares of Rs.10 each issued at a premium of 25%. Journalise.

Q. Y Ltd redeemed 4,800,

12 %

debentures of Rs 100 each which were issued at par, at 110 per cent by converting them into equity shares of Rs 10 each issued at a discount of

4 %

. Journalise.

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Date	Particulars		L.F.	Dr. Rs.	Cr. Rs.
2014
April 1	Bank A/c	Dr.		4,70,000
	To Debenture Application A/c				4,70,000
	(Being application money on 5000 debentures received @ Rs.94 each)

April 1	Debenture Application A/c	Dr.		4,70,000
	Discount on issue of debentures A/c	Dr.		30,000
	To 8% Debentures A/c				5,00,000
2016
March 31	8% Debentures A/c	Dr.		1,00,000
	To Debenture holders’ A/c				1,00,000
	(Being redemption of first 1000 debentures due)

March 31	Debenture holders’ A/c	Dr.		1,00,000
	To Share Capital A/c				80,000
	To Securities Premium Reserve A/c				20,000
	(Being 8000 shares issued against conversion debentures.)