Question

R. Ltd., issued 88,00,000, 8% debentures of Rs. 50 each at a premium of 5 % on July 1, 2014 redeemable at par by conversion of debentures into shares of Rs. 20 each at a premium of Rs. 2 per share on June 30, 2017. Record necessary entries for redemption of debentures.

Answer 1

Journal of R. Ltd.
Date	Particulars	L.F.	Debit (₹)	Credit (₹)
2017
June 30	8% Debentures A/c   ...Dr.		44,00,00,000	-
	To Debentureholders A/c		-	44,00,00,000
	(Being the amount due to debentureholders on redemption at par)
June 30	Debentureholders A/c   ...Dr.		44,00,00,000	-
	To Equity Share Capital A/c		-	40,00,00,000
	To Securities Premium A/c		-	4,00,00,000
	(Being the liability settled by issuing 2,00,00,000 equity shares of Rs. 20 each at a premium of Rs. 2 per share)

Working Note:

1. Face Value of Debentures to be Redeemed:

Nominal Value Outstanding = 88,00,000 × 50

= 44,00,00,000

2. Allocation of Equity Shares for Conversion

Redemption Condition = 44,00,00,000

Issue Price per New Equity Share = Face Value + Premium

= 20 + 2

= 22

3. Number of Shares to be Issued:

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

= `(44,00,00,000)/22`

= 2,00,00,000 Shares

Total Nominal Value of Equity Capital = 2,00,00,000 × 20

= 40,00,00,000

Total Securities Premium Reserve on Shares = 2,00,00,000 × 2

= 4,00,00,000