Question

X Ltd issued 5,000 $15\%$ debentures of Rs 100 each on January 01, 2004 at a discount of $10\%$ redeemable at a premium of $10\%$ in equal annual drawings in 4 years out of capital.
Give journal entries both at the time of issue and redemption of debentures. (Ignore the treatment of loss on issue of debentures and interest.)

Answer 1

$\text{Journal Entries}\begin{array}{cccccc}\text{Date}& \text{Particulars}& & \text{LF}& \text{Amt. (Dr)}& \text{Amt. (Cr)}\\ 2004& & & & & \\ \text{Jan 1}& \text{Bank A/c}& \text{Dr}& & 4,50,000& \\ & \text{To Debenture Application and Allotment A/c}& & & & 4,50,000\\ & \text{(Application and allotment money received)}& & & & \\ & \text{for 5,000}15\%\text{debentures at Rs 90 each}& & & & \\ & \text{Debenture Application and Allotment A/c}& \text{Dr}& & 4,50,000& \\ & \text{Loss on Issue of Debenture A/c (W Note)}& \text{Dr}& & 1,00,000& \\ & \text{To}15\%\text{Debentures A/c}& & & & 5,00,000\\ & \text{To Premium on Issue of Debentures A/c}& & & & 50,000\\ & \text{(5,000}15\%\text{debentures A Rs 100 each with}& & & & \\ & \text{the term of}10\%\text{discount on issue and repayable with}& & & & \\ & 10\%\text{Premium allotted}& & & & \\ \text{Dec 31}& 15\%\text{Debenture A/c}& \text{Dr}& & 1,25,000& \\ & \text{Premium on Redemption of Debentures A/c}& \text{Dr}& & 12,500& \\ & \text{To Debenture Holders A/c}& & & & 1,37,500\\ & \text{(1250},15\%\text{Debentures at Rs 100 each due}& & & & \\ & \text{for redemption at}10\%premium)& & & & \\ & \text{Debenture Holder A/c}& \text{Dr}& & 1,37,500& \\ & \text{To Bank A/c}& & & & 1,37,500\\ & \text{(Amount of debentures paid to debenture}& & & & \\ & \text{Holders)}& & & & \\ \text{2005}& & & & & \\ \text{Dec 31}& 15\%\text{Debenture A/c}& \text{Dr}& & 1,25,000& \\ & \text{Premium on Redemption on Debntures A/c}& \text{Dr}& & 12,500& \\ & \text{To Debenture Holders}& & & & 1,37,500\\ & \text{(1250}15\%\text{debentures at Rs 100 each due}& & & & \\ & \text{for redemption at}10\%\text{premium)}& & & & \\ & \text{Debenture Holder A/c}& \text{Dr}& & 1,37,500& \\ & \text{To Bank A/c}& & & & 1,37,500\\ & \text{(Amount of debentures paid to debenture}& & & & \\ & \text{holder)}& & & & \\ \text{2006}& & & & & \\ \text{Dec 31}& 15\%\text{Debentures A/c}& \text{Dr}& & 1,25,000& \\ & \text{Premium on Redemption of Debentures A/c}& \text{Dr}& & 12,500& \\ & \text{To Debenture Holder}& & & & 1,37,500\\ & \text{(1250,}15\%\text{debentures at Rs 100 each due}& & & & \\ & \text{for redemption at}10\%\text{premium)}& & & & \\ & \text{Debenture Holder}& \text{Dr}& & 1,37,500& \\ & \text{To Bank A/c}& & & & 1,37,500\\ & \text{(Amount of debentures paid to debenture}& & & & \\ & \text{holders)}& & & & \\ \text{2007}& & & & & \\ \text{Dec 31}& 15\%\text{Debentures A/c}& \text{Dr}& & 1,25,000& \\ & \text{Premium on Redemption of Debentures A/c}& \text{Dr}& & 12,500& \\ & \text{To Debenture Holder}& & & & 1,37,500\\ & \text{(1250,}15\%\text{debentures at Rs 100 each due}& & & & \\ & \text{for redemption at}10\%\text{premium)}& & & & \\ & \text{Debenture Holder}& \text{Dr}& & 1,37,500& \\ & \text{To Bank A/c}& & & & 1,37,500\\ & \text{(Amount of debentures paid to debenture}& & & & \\ & \text{holders)}& & & & \end{array}$

Working Note
Loss on issue of Debenture includes $10\%$ discount of issue and $10\%$ premium of redemption i.e., $20\%$ on face value

$(\frac{20}{100}\times 5,00,000=1,00,000)$