Question

On 1.4.2019, Fast Computers Ltd. issued 20,00,000, 6% debentures of Rs. 100 each at a discount of 4%, redeemable at a premium of 5% after three years. The amount was payable as follows:

On application Rs. 50 per debenture, Balance on allotment, Record the necessary journal entries for the issue of debentures.

Answer 1

Journal of Fast Computers Ltd.
Date	Particulars	L.F.	Debit (₹)	Credit (₹)
2019
Apr 01	Bank A/c   ...Dr.		10,00,00,000	-
	To Debenture Application A/c		-	10,00,00,000
	(Being application money received for 20,00,000 debentures @ Rs. 50 each)
Apr 01	Debenture Application A/c   ...Dr.		10,00,00,000	-
	To 6% Debentures A/c		-	10,00,00,000
	(Being application money transferred to 6% Debentures account)
Apr 01	Debenture Allotment A/c   ...Dr.		9,20,00,000	-
	Loss on Issue of Debentures A/c   ...Dr.		1,80,00,000	-
	To 6% Debentures A/c		-	10,00,00,000
	To Premium on Redemption of Debentures A/c		-	1,00,00,000
	(Being allotment money made due, accounting for 4% issue discount and 5% redemption premium liability)
Apr 01	Bank A/c   ...Dr.		9,20,00,000
	To Debenture Allotment A/c		-	9,20,00,000
	(Being allotment money received @ Rs. 46 per debenture)

Working Note:

Total Loss on Issue = Discount (Rs. 4) + Premium on Redemption (Rs. 5)

= Rs. 9

Total Loss Amount = 20,00,000 × 9

= 1,80,00,000

Total Premium on Redemption Liability = 20,00,000 × 5

= 1,00,00,000

Total Application Amount = 20,00,000 × 50

= 10,00,00,000

Allotment Money (Due) = Remaining Face Value (Rs. 50) − Discount (Rs. 4)

= Rs. 46 per debenture

Total Allotment Amount = 20,00,000 × 46

= 9,20,00,000