Question

On 31 March, 2017, Janta Ltd. converted its Rs. 88,00,000, 6% debentures into equity shares of Rs. 20 each at a premium of Rs. 2 per share. Record necessary journal entries in the books of the company for redemption of debentures.

Answer 1

Journal of Janta Ltd.
Date	Particulars	L.F.	Debit (₹)	Credit (₹)
2017
Mar 31	6% Debentures A/c   ...Dr.		88,00,000	-
	To Debentureholders A/c			88,00,000
	(Being the amount due to debentureholders on redemption at par)
Mar 31	Debentureholders A/c   ...Dr.		88,00,000	-
	To Equity Share Capital A/c		-	80,00,000
	To Securities Premium Account		-	8,00,000
	(Being the liability settled by issuing 4,00,00,0 equity shares of Rs. 20 each at a premium of Rs. 2 per share)

Working Notes:

Issue Price per Share = Face Value + Securities Premium

= 20 + 2

= 22

Number of Equity Shares = `"Total Amount Due"/"Issue Price per Share"`

= `(88,00,000)/22`

= 4,00,000

Nominal Value (Equity Share Capital) = 4,00,000 × 20

= 80,00,000

Securities Premium Reserve Amount = 4,00,000 × 2

= 8,00,000