Question

Nena Limited issued 50,000, 10% debentures of Rs. 100 each on the basis of the following conditions:

1. Debentures issued at par and redeemable at par.
2. Debentures issued at a discount @ 5% and redeemable at par.
3. Debentures issued at a premium @ 10% and redeemable at par.
4. Debentures issued at par and redeemable at a premium @ 10%.
5. Debentures issued at a discount of 5% and redeemable at a premium of10%.
6. Debentures issued at a premium of 6% and redeemable at a premium of 4%.

Record necessary journal entries in the above-mentioned cases at the time of issue and redemption of debentures.

Answer 1

Case (a): Issued at par and redeemable at par

Total Face Value = 50,000 × 10

= 50,00,000

At the time of Issue:

Journal Entries
Date	Particulars	L.F.	Debit (₹)	Credit (₹)
1.	Bank A/c   ...Dr.		50,00,000	-
	To Debenture Application & Allotment A/c		-	50,00,000
	(Application money received for 50,000 debentures)
2.	Debenture Application & Allotment A/c   ...Dr.		50,00,000	-
	To 10% Debentures A/c		-	50,00,000
	(Allotment of 10% debentures at par)

At the time of Redemption

Journal Entries
Date	Particulars	L.F.	Debit (₹)	Credit (₹)
1.	10% Debentures A/c   ...Dr.		50,00,000	-
	To Debentureholders A/c		-	50,00,000
	(Amount due to debentureholders at par)
2.	Debentureholders A/c   ...Dr.		50,00,000	-
	To Bank A/c		-	50,00,000
	(Payment made on redemption)

Case (b): Issued at a discount @ 5% and redeemable at par

At the time of Issue

Journal Entries
Date	Particulars	L.F.	Debit (₹)	Credit (₹)
1.	Bank A/c   ...Dr.		47,50,000	-
	To Debenture Application & Allotment A/c		-	47,50,000
	(Application money received 5% discount)
2.	Debenture Application & Allotment A/c   ...Dr.		47,50,000	-
	Discount on Issue of Debentures A/c   ...Dr.		2,50,000	-
	To 10% Debentures A/c		-	50,00,000
	(Debentures issued at a discount)

At the time of Redemption

Journal Entries
Date	Particulars	L.F.	Debit (₹)	Credit (₹)
1.	10% Debentures A/c   ...Dr.		50,00,000	-
	To Debentureholders A/c		-	50,00,000
	(Amount due to debentureholders at par)
2.	Debentureholders A/c   ...Dr.		50,00,000	-
	To Bank A/c		-	50,00,000
	(Payment made on redemption)

Case (c): Issued at a premium @ 10% and redeemable at par

At the time of Issue

Journal Entries
Date	Particulars	L.F.	Debit (₹)	Credit (₹)
1.	Bank A/c   ...Dr.		55,00,000	-
	To Debenture Application & Allotment A/c		-	55,00,000
	(Application money received 10% premium)
2.	Debenture Application & Allotment A/c   ...Dr.		55,00,000	-
	To 10% Debentures A/c		-	50,00,000
	To Securities Premium A/c		-	5,00,000
	(Debentures issued at a premium)

At the time of Redemption

Journal Entries
Date	Particulars	L.F.	Debit (₹)	Credit (₹)
1.	10% Debentures A/c   ...Dr.		50,00,000	-
	To Debentureholders A/c		-	50,00,000
	(Amount due to debentureholders)
2.	Debentureholders A/c   ...Dr.		50,00,000	-
	To Bank A/c		-	50,00,000
	(Payment made on redemption)

Case (d): Issued at par and redeemable at a premium @ 10%

At the time of Issue

Journal Entries
Date	Particulars	L.F.	Debit (₹)	Credit (₹)
1.	Bank A/c   ...Dr.		50,00,000	-
	To Debenture Application & Allotment A/c		-	50,00,000
	(Application money received at par)
2.	Debenture Application & Allotment A/c   ...Dr.		50,00,000	-
	Loss on Issue of Debentures A/c   ...Dr.		5,00,000	-
	To 10% Debentures A/c		-	50,00,000
	To Premium on Redemption of Debentures A/c		-	5,00,000
	(Debentures issued with redemption premium liability)

At the time of Redemption

Journal Entries
Date	Particulars	L.F.	Debit (₹)	Credit (₹)
1.	10% Debentures A/c   ...Dr.		50,00,000	-
	Premium on Redemption of Debentures A/c   ...Dr.		5,00,000	-
	To Debentureholders A/c		-	55,00,000
	(Amount due to debentureholders with premium)
2.	Debentureholders A/c   ...Dr.		55,00,000	-
	To Bank A/c		-	55,00,000
	(Payment made on debentureholders)

Case (e): Issued at a discount of 5% and redeemable at a premium of 10%

Total Loss = 5% Discount + 10% Redemption Premium = 15% Total

At the time of Issue

Journal Entries
Date	Particulars	L.F.	Debit (₹)	Credit (₹)
1.	Bank A/c   ...Dr.		47,50,000	-
	To Debenture Application & Allotment A/c		-	47,50,000
	(Application money received at 5% discount)
2.	Debenture Application & Allotment A/c   ...Dr.		47,50,000	-
	Loss on Issue of Debentures A/c   ...Dr.		7,50,000	-
	To 10% Debentures A/c		-	50,00,000
	To Premium on Redemption of Debentures A/c		-	5,00,000
	(Debentures issued at discount and redeemable at premium)

At the time of Redemption

Journal Entries
Date	Particulars	L.F.	Debit (₹)	Credit (₹)
1.	10% Debentures A/c   ...Dr.		50,00,000	-
	Premium on Redemption of Debentures A/c   ...Dr.		5,00,000	-
	To Debentureholders A/c		-	55,00,000
	(Amount due on redemption with premium)
2.	Debentureholders A/c   ...Dr.		55,00,000	-
	To Bank A/c		-	55,00,000
	(Payment made to debentureholders)

Case (f): Issued at a premium of 6% and redeemable at a premium of 4%

At the time of Issue

Journal Entries
Date	Particulars	L.F.	Debit (₹)	Credit (₹)
1.	Bank A/c   ...Dr.		53,00,000	-
	To Debenture Application & Allotment A/c		-	53,00,000
	(Application money received at 6% premium)
2.	Debenture Application & Allotment A/c   ...Dr.		53,00,000	-
	Loss on Issue of Debentures A/c   ...Dr.		2,00,000	-
	To 10% Debentures A/c		-	50,00,000
	To Securities Premium A/c		-	3,00,000
	To Premium on Redemption of Debentures A/c		-	2,00,000
	(Debentures issued at a premium and redeemable at a premium)

At the time of Redemption

Journal Entries
Date	Particulars	L.F.	Debit (₹)	Credit (₹)
1.	10% Debentures A/c   ...Dr.		50,00,000	-
	Premium on Redemption of Debentures A/c   ...Dr.		2,00,000
	To Debentureholders A/c		-	52,00,000
	(Amount due on redemption with premium)
2.	Debentureholders A/c   ...Dr.		52,00,000	-
	To Bank A/c		-	52,00,000
	(Payment made to debentureholders)