Question

Jain Motors Ltd. converted its 200, 8% debentures of Rs 100 each issued at a discount of 6% into equity shares of Rs 10 each, issued at a premium of 25%. Discount on issue of 8% debentures has not yet been written off.

Showing your working notes clearly pass necessary Journal Entries on conversion of 8% debentures into equity shares.

Answer 1

Journal
Date	Particulars		L.F.	Debit Amount (Rs)	Credit Amount (Rs)
	8% Debentures A/c	Dr.		20,000
	To Debentureholders’ A/c				20,000
	(200, 8% Debentures due for redemption)
	Debentureholders’ A/c	Dr.		20,000
	To Equity Share Capital A/c (1,600 × 10)				16,000
	To Securities Premium A/c (1,600 × 2.50)				4,000
	(200, 8% Debentures redeemed by converting into 1,600 equity shares of Rs 10 each issued at a premium of 25%)
	Securities Premium A/c	Dr.		1,200
	To Discount on Issue of Debentures A/c				1,200
	(Discount on issue of debentures written off against balance in securities premium account)