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प्रश्न
Long Answer Question
Explain the different terms for the issue of debentures with reference to their redemption.
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उत्तर
The different terms for the issue of debentures with reference to their redemption can be the combinations of at par, at premium and at discount. Normally, the debentures are not redeemable at discount. The permutation and the combination of the various terms of issue and redemption of debentures give rise to following six situations:
- Issue at Par, Redeemable at Par.
- Issue at Premium, Redeemable at Par.
- Issue at Discount, Redeemable at Par.
- Issue at Par, Redeemable at Premium.
- Issue at Premium, Redeemable at Premium.
- Issue at Discount Redeemable at Premium.
Issue at Par and Redeemable at Par- When the debentures are issued and are redeemed at their face value, then the following Journal entry is passed.
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Bank A/c |
Dr. (with the amount received) |
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To Debenture Application A/c |
(with the face value) |
|
(Debenture Application money received) |
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Debenture Application A/c |
Dr. |
|
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To Debenture A/c |
|
|
(Application money transferred to Debenture Account) |
||
2. Issue at Premium and Redeemable at Par- When the debentures are issued at premium and are redeemable at par, then the following Journal entry is passed. As premium is a gain for a company so it is credited in the Journal entry.
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Bank A/c |
Dr. |
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To Debenture Application A/c |
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|
(Debenture Application money received) |
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Debenture Application A/c |
Dr. |
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To Debenture A/c |
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To Securities Premium A/c |
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(Debentures issued at premium and redeemable at par) |
||
- Issue at Discount and Redeemable at Par- When the debentures are issued at discount and are redeemable at par, then the following Journal entry is passed. As discount is a loss for a company so it is debited in the Journal entry.
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Bank A/c |
Dr. |
|
|
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To Debenture Application A/c |
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(Debenture Application money received) |
||
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Debenture Application A/c |
Dr. |
|
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Discount on Issue of Debenture A/c |
Dr. |
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To Debenture A/c |
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(Debentures issued at discount and redeemable at par) |
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- Issue at Par and Redeemable at Premium- When debentures are issued at par and redeemable at premium, then the following Journal entry is passed. In such case, the company did not suffer any loss at the time of issue but there will be loss at the time of redemption.
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Bank A/c |
Dr. |
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To Debenture Application A/c |
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|
(Debenture Application money received) |
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Debenture Application A/c |
Dr. |
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Loss on Issue of Debenture A/c |
Dr. (with the amount of premium on redemption) |
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To Debenture A/c |
(with the face value of the debentures) |
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To Premium on Redemption of Debenture A/c |
(with the amount of premium on redemption) |
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(Debentures issued at par and redeemable at premium) |
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5. Issued at Premium and Redemption at Premium- When the debentures are issued and redeemable at premium, then the following Journal entry is passed.
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Bank A/c |
Dr. |
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To Debenture Application A/c |
|
|
(Debenture Application money received) |
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Debenture Application A/c |
Dr. |
|
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Loss on Issue of Debenture A/c |
Dr. (with the amount of premium on redemption) |
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To Debenture A/c |
(with the face value of the debentures) |
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To Securities Premium A/c |
(with the amount of premium on issue) |
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To Premium on Redemption of Debenture A/c |
(with the amount of premium on redemption) |
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(Debentures issued at premium and redeemable at premium) |
||
- Issue of Discount and Redemption at Premium-When the debentures are issued at discount and redeemable at premium, then the following Journal entry is passed.
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Bank A/c |
Dr. |
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To Debenture Application A/c |
|
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(Debenture Application money received) |
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Debenture Application A/c |
Dr. |
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Loss on Issue of Debenture A/c |
Dr. (with the amount of discount on issue plus amount of premium on redemption) |
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To Debenture A/c |
(with the face value of the debentures) |
|
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To Premium on Redemption of Debenture A/c |
(with the amount of premium on redemption) |
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(Debentures issued at discount and redeemable at premium) |
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संबंधित प्रश्न
Short Answer Question
What is meant by ‘Issue of debentures for Consideration other than Cash’?
Short Answer Question
What is ‘Capital Reserve’?
What is meant by an ‘Irredeemable Debenture’?
Journalise the following:
(i) A debenture issued at Rs 95, repayable at Rs 100;
(ii) A debenture issued at Rs 95, repayable at Rs 105; and
(iii) A debenture issued at Rs 100, repayable at Rs 105;
The face value of debenture in each of the above cases is Rs 100.
B. Ltd. issued debentures at 94% for Rs 4,00,000 on April 01, 2011 repayable by five equal drawings of Rs 80,000 each. The company prepares its final accounts on March 31 every year.
Indicate the amount of discount to be written-off every accounting year assuming that the company decides to write-off the debentures discount during the life of debentures. (Amount to be written-off: 2012 Rs 8,000; 2013 Rs 6,400; 2014 Rs 4,800; 2015 Rs 2,000; 2016 Rs 1,600).
B. Ltd. issued 1,000, 12% debentures of Rs 100 each on April 01, 2014 at a discount of 5% redeemable at a premium of 10%.
Give journal entries relating to the issue of debentures and debentures interest for the period ending March 31, 2015 assuming that interest is paid half yearly on September 30 and March 31 and tax deducted at source is 10%.
A Ltd . issued 2,000; 9% Debentures of ₹ 100 each on the following terms:
₹20 on applications ;₹ 20 on allotment ; ₹ 30 on first call ; ₹ 30 on final call.
The public applied for 2,400 debentures. Applications for 1,800 debentures were accepted in full. Applications for 400 debentures were allotted 200 debentures and applications for 200 debentures were rejected . Pass necessary Journal entries .
Narain Laxmi Ltd. invited applications for issuing 7,500; 12% Debentures of ₹ 100 each at a premium of ₹ 35 per debenture . The full amount was payable on application. Applications were received for 10,000 Debentures. Allotment was made to all the applications on pro rata.
Pass necessary Journal entries for the above transactions in the books of Narain Laxmi Ltd.
Wye Ltd . purchased an established business for ₹ 2,00,000 payable as ₹ 65,000 by cheque and the balance by issuing 9% Debentures of ₹ 100 each at a discount of 10%.
Give journal entries in the books of Wye Ltd.
Grown Ltd. issued 500, 10% Debentures of ₹ 1,000 each credited as fully paid-up to the promoters for their services to incorporate the company. It also issued 100, 10% Debentures of ₹ 1,000 each credited as fully paid-up to the underwriters towards their commission. Pass the Journal entries.
Pass necessary Journal entries relating to the issue of debentures for the following:
(a) Issued ₹ 28,000; 10% Debentures of ₹ 100 each at a premium of 15% redeemable at par.
(b) Issued ₹ 30,000; 10% Debentures of ₹ 100 each at a premium of 10% and redeemable at a premium of 15%.
(c) Issued ₹ 80,000; 10% Debentures of ₹ 100 each at par repayable at a premium of 10%.
Journalise the following transaction at the time of issue of 12% Debentures:
Nandan Ltd. issued ₹90,000, 12% Debentures of ₹ 100 each at a discount of 5% redeemable at 110%.
On 1st April, 2017, Solar Power Ltd. issued 10,000, 8% Debentures of ₹ 100 each at a discount of 5% redeemable at a premium of 15% at the end of five years. All the debentures were subscribed and allotment was made. The company had balance in Securities Premium Reserve of ₹ 80,000.
Prepare the Balance Sheet (extract) as at 31st March, 2018.
Debenture interest is paid as ______.
The loss on issue of Debentures is written-off from ______.
Debenture premium cannot be used to ______.
Pick the odd one out.
XYZ Ltd. Issued 6,000, 12% Debentures of ? 50 each on April 1, 2014. Interest on these debenture is payable annually 3151 March each year. The debentures are redeemable in four equal installments at end of third, fourth, fifth and sixth year. You are required to pan journal entries at the time of issue and redemption of debentures in the books of the company under following cases:
- Debentures are issued at par and redeemable at par.
- Debentures are issued at a premium of 10% and redeemable at par.
- Debentures are issued at a discount of 10% and redeemable at par.
- Debenture are issued at par but redeemable at a premium of 10%.
- Debentures are issued at a premium of 10% and redeemable at premium of 10%.
- Debenture are issued at a discount of 10% and redeemable at a premium of 10%.
X Ltd. purchased assets of ₹ 18,00,000 and took over liabilities of ₹ 6,00,000 of Y Ltd. for a purchase consideration of ₹ 10,00,000. The payment to Y Ltd. was made by issue of 9% debentures of ₹ 100 each at ₹ 125. Calculate the number of 9% debentures issued in favour of Y Ltd. and pass the necessary journal entries for the above transactions in the books of X Ltd.
