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

In the books of Z. Ltd.
Date	Particulars			L.F.	Debit Amount Rs	Credit Amount Rs
	12% Debentures A/c		Dr.		2,00,000
	To Debenture Holders					1,90,000
	To Discount on Issue of Debentures A/c					10,000
	(Amount of debentures due to Debenture Holders)
	Debenture Holders A/c		Dr.		1,90,000
	To Equity Share Capital A/c					1,52,000
	To Securities Premium A/c					38,000
	(15,200 equity shares @ Rs 10 each at 25% Premium issued to Debenture Holders in lieu of debentures)
Note: Here it has been assumed that the debentures are converted into equity shares before the date of redemption. If the debentures are converted into shares before maturity, then the net proceeds from the issue of debentures will be taken at the time of conversion.