Question

Jain Ltd. converted 500, 8% debentures of Rs 100 each issued at a discount of 6% into equity shares of Rs 10 each issued at a premium of Rs 25 per share. Discount on issue of 8% debentures has not yet been written off. Showing your working notes clearly, pass necessary journal entries for conversion of 8% debentures into equity shares.

Answer 1

Journal
Date	Particulars	L.F.	Dr. Rs	Cr. Rs
	8% Debentures A/c     Dr.     To Debenture holder’s A/c (500 × Rs  100) (Being 200, 9%Debenture due for redemption.)		20,000	20,000
	Debenture holder’s A/c      Dr.     To Equity Share Capital A/c (1,600 × 10)     To Securities Premium A/c (1,600 × 2.50) (Being 200, 8% Debentures redeemed by converting into1,600 equity shares of Rs 10 each issued at a Premium of  Rs 25%)		20,000	16,000 4,000
	Securities Premium A/c     Dr    To Discount on Issued of Debentures A/c (Being Discount on issue of Debentures written off against the balance in Securities Premium Account.)		1,200	12,00

Working Note:

No. of Equity Share = `" Amount Payable"/"Issued Price"`

`=(20,000)/12.5=1,600`

No. of Equity Share = 1,600 shares.