Question

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.

Answer 1

$\text{Journal Entries}\begin{array}{cccccc}\text{Date}& \text{Particulars}& & \text{LF}& \text{Amt. (Dr)}& \text{Amt. (Cr)}\\ & 12\%\text{Debenture A/c}& \text{Dr}& & 2,00,000& \\ & \text{To Debenture Holders A/c}& \text{Dr}& & & 1,90,000\\ & \text{To Discount on Issue of Debentures A/c}& & & & 10,000\\ & \text{(Amount of debentures due to debenture}& & & & \\ & \text{holders)}& & & & \\ & \text{Debenture Holders A/c}& \text{Dr}& & 1,90,000& \\ & \text{To Equity Share Capital A/c}(15,200\times 10)& & & & 1,52,000\\ & \text{To Securities Premium A/c}(15,200\times 2.50)& & & & 38,000\\ & \text{(15,200 equity shares at Rs 10 each at}25\%& & & & \\ & \text{premium issued to debenture holders in lieu of debentures)}& & & & \end{array}$


Note If the debentures are converted before the date of maturity then the net proceeds (collection) from issue of debentures will be taken on conversion as assumed in this question.

Number of shares to be issueded = $\frac{1,90,000}{12.50}=15,200$ shares