Question

Z Ltd issued, 2000, $14\%$ debentures of Rs 100 each on January 01, 2005 at a discount of $10\%$ redeemable at a premium of $10\%$ in equal annual drawings in 4 years our of profits.
Give journal entries 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)}\\ \text{2005}& & & & & \\ \text{Jan 1}& \text{Bank A/c}& \text{Dr}& & 1,80,000& \\ & \text{To Debenture Application and Allotment A/c}& & & & 1,80,000\\ & \text{(Debenture application and allotment}& & & & \\ & \text{money received for 2,0000}14\%\text{debentures of}& & & & \\ & \text{Rs 100 at Rs 90 each)}& & & & \\ & \text{Debenture Application and Allotment A/c}& \text{Dr}& & 1,80,000& \\ & \text{Loss on Issue of Debentures A/c}& \text{Dr}& & 40,000& \\ & \text{To}14\%\text{Debentures A/c}& & & & 2,00,000\\ & \text{To Premium on Issue of Debentures A/c}& & & & 20,000\\ & \text{(2000}14\%\text{debentures at Rs 100 each}& & & & \\ & \text{allotted with the term of}10\%\text{discount on issue}& & & & \\ & \text{and repayable at}10\%\text{premium)}& & & & \\ \text{Dec 31}& \text{Profit and Loss Appropriation A/c}& \text{Dr}& & 2,00,000& \\ & \text{To Debentures Redemption Reserve A/c}& & & & 2,00,000\\ & \text{(Profit transferred to debentures}& & & & \\ & \text{redemption reserve)}& & & & \\ & 14\%\text{Debentures A/c}& \text{Dr}& & 50,000& \\ & \text{Premium on Redemption of Debentures A/c}& \text{Dr}& & 5,000& \\ & \text{To Debenture Holders A/c}& & & & 55,000\\ & \text{(Amount due for redemption of}& & & & \\ & \text{debentures)}& & & & \\ & \text{Debenture Holder A/c}& \text{Dr}& & 55,000& \\ & \text{To Bank A/c}& & & & 55,000\\ & \text{(Amount of 500,}14\%\text{Debentures paid to}& & & & \\ & \text{debentures holders)}& & & & \\ 2006& & & & & \\ \text{Dec 31}& 14\%\text{Debenture A/c}& \text{Dr}& & 50,000& \\ & \text{Premium on Redemption of Debentures A/c}& \text{Dr}& & 5,000& \\ & \text{To Debenture Holder A/c}& & & & 55,000\\ & \text{(Amount due for redemption of debenture)}& & & & \\ & \text{Debenture Holders A/c}& \text{Dr}& & 55,000& \\ & \text{To Bank A/c}& & & & 55,000\\ & \text{(Amount of 500}14\%\text{debentures paid to}& & & & \\ & \text{debenture holders)}& & & & \\ 2007& & & & & \\ \text{Dec 31}& 14\%\text{Debenture A/c}& \text{Dr}& & 50,000& \\ & \text{Premium on Redemption of Debentures A/c}& \text{Dr}& & 5,000& \\ & \text{To Debenture Holder A/c}& & & & 55,000\\ & \text{(Amount due for redemption of debenture)}& & & & \\ & \text{Debenture Holders A/c}& \text{Dr}& & 55,000& \\ & \text{To Bank A/c}& & & & 55,000\\ & \text{(Amount of 500}14\%\text{debentures paid to}& & & & \\ & \text{debenture holders)}& & & & \\ 2008& & & & & \\ \text{Dec 31}& 14\%\text{Debenture A/c}& \text{Dr}& & 50,000& \\ & \text{Premium on Redemption of Debentures A/c}& \text{Dr}& & 5,000& \\ & \text{To Debenture Holder A/c}& & & & 55,000\\ & \text{(Amount due for redemption of debenture)}& & & & \\ & \text{Debenture Holders A/c}& \text{Dr}& & 55,000& \\ & \text{To Bank A/c}& & & & 55,000\\ & \text{(Amount of 500}14\%\text{debentures paid to}& & & & \\ & \text{debenture holders)}& & & & \end{array}$