Question

On 1st July, 2024, Udaan Ltd. issued 20,000, 7% Debentures of ₹ 100 each at a premium of 5%, redeemable after 5 years at a premium of 10%.

According to the terms of issue of debentures, interest on debentures was payable yearly on 31st March.

You are required to:

1. Pass the necessary journal entries in the books of Udaan Ltd. on the date of issue of debentures.
2. Prepare Interest on Debentures Account for the year 2024-25.

Answer 1

Journal Entries in the books of Udaan Ltd.
Date	Particulars	L.F.	Dr. (₹)	Cr. (₹)
2024
July 1	Bank A/c   ...Dr.		21,00,000	-
	To Debenture Application & Allotment A/c		-	21,00,000
	(Being application money received)
July 1	Debenture Application & Allotment A/c   ...Dr.		21,00,000	-
	Loss on Issue of Debentures A/c   ...Dr.		2,00,000	-
	To 7% Debentures A/c		-	20,00,000
	To Securities Premium A/c		-	1,00,000
	To Premium on Redemption of Debentures A/c		-	2,00,000
	(Being debentures issued at 5% premium and redeemable at 10% premium)

 

Dr.	Interest on Debentures Account				Cr.
Date	Particulars	Amount (₹)	Date	Particulars	Amount (₹)
2025 Mar 31	To Debentureholders A/c	1,05,000	2025 Mar 31	By Statement of Profit & Loss	1,05,000
		1,05,000			1,05,000

Working Note:

Face Value of Debentures = 20,000 × 100

= 20,00,000

Issue Price (at 5% premium) = 20, 00,000 + 5%

= 21,00,000

Premium on Redemption (at 10%) = `20,00,000 xx 10/100`

= 2,00,000

Interest Calculation (for 2024-25):

Face Value = 20,000 × 100

= 20,00,000

Period = 1st July, 2024 to 31st March, 2025 (9 months)

Interest = `20,00,000 xx 7/100 xx 9/12`

= 1,05,000