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Question

Z.Ltd. issued 2,000, 14% debentures of Rs.100 each on April 01, 2013 at a discount of 10%, redeemable at a premium of 10% in equal annual drawings in 4 years out of profits.

Give journal entries both at the time of issue and redemption of debentures. (Ignore the treatment of loss on issue of debentures and interest.)

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Solution

Books of Z. Ltd.

Journal

Date

Particulars

L.F.

Debit

Amount

Rs

Credit

Amount

Rs

2013

Apr. 1

Bank A/c

Dr.

1,80,000

To Debenture Application and Allotment A/c

1,80,000

(Debenture Application and Allotment money received for 2,000

14% Debentures of Rs 100 at Rs 90 each)

Debenture Application and Allotment A/c

Dr.

1,80,000

Loss on Issue of Debentures A/c

Dr.

40,000

To 14% Debentures A/c

2,00,000

To Premium on Issue of Debentures A/c

20,000

(2000 14% Debentures @ Rs 100 each allotted with the term

of 10 % discount on issue and repayable at 10% premium)

Mar. 31

Profit and Loss Appropriation A/c

Dr.

2,00,000

To Debentures Redemption Reserve A/c

2,00,000

(Profit transferred to Debentures Redemption Reserve)

14% Debentures A/c

Dr.

50,000

Premium on Redemption of Debentures A/c

Dr.

5,000

To Debenture Holders A/c

55,000

(Amount due for redemption of debentures)

Debenture Holders A/c

Dr.

55,000

To Bank A/c

55,000

(Amount of 500 14% Debentures paid to Debenture Holders)

2014

Mar. 31

14% Debentures A/c

Dr.

50,000

Premium on Redemption of Debentures A/c

Dr.

5,000

To Debenture Holders A/c

55,000

(Amount due for redemption of Debentures)

Debenture Holders A/c

Dr.

55,000

To Bank A/c

55,000

(Amount of 500 14% Debentures paid to Debenture Holders)

2015

Mar. 31

14% Debentures A/c

Dr.

50,000

Premium on Redemption of Debentures A/c

Dr.

5,000

To Debenture Holders A/c

55,000

(Amount due for redemption of debentures)

Debenture Holders A/c

Dr.

55,000

To Bank A/c

55,000

(Amount of 500 14% Debentures paid to Debenture Holders)

2016

Mar. 31

14% Debentures A/c

Dr.

50,000

Premium on Redemption of Debentures A/c

Dr.

5,000

To Debenture Holders A/c

55,000

(Amount due for redemption of debentures)

Debenture Holders A/c

Dr.

55,000

To Bank A/c

55,000

(Amount of 500 14% Debentures paid to Debenture Holders)


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