Question

Linux Ltd. issued 12,000; 8% Debentures of ₹ 100 each at a discount of 5% payable as 25% on application; 20% on allotment and balance after three months.

Pass Journal entries.

Answer 1

Journal Entries In the Books of Linux Ltd.
Date	Particulars	L.F.	Dr. (₹)	Cr. (₹)
1.	Bank A/c   ...Dr.		3,00,000
	To Debentures Application A/c			3,00,000
	(Application money received)
2.	Debentures Application A/c   Dr.		3,00,000
	To 8% Debentures A/c			3,00,000
	(Application money transferred to Debentures A/c)
3.	Debentures Allotment A/c   ...Dr.		1,80,000
	Discount on Issue of Debentures A/c   ...Dr.		60,000
	To 8% Debentures A/c			2,40,000
	(Allotment money due and discount @ 5% adjusted)
4.	Bank A/c   ...Dr.		1,80,000
	To Debentures Allotment A/c			1,80,000
	(Allotment money received)
5.	Debentures First and Final Call A/c   ...Dr.		6,60,000
	To 8% Debentures A/c			6,60,000
	(Balance due after three months @ ₹ 55 per debenture)
6.	Bank A/c   ...Dr.		6,60,000
	To Debentures First and Final Call A/c			6,60,000
	(First and final call money received)

Working note:

Face value of debentures:

12,000 × ₹ 100 = ₹ 12,00,000

Discount @ 5%:

12,000 × ₹ 5 = ₹ 60,000

Application @ 25%:

12,000 × ₹ 25 = ₹ 3,00,000

Allotment @ 20% of face value:

12,000 × ₹ 20 = ₹ 2,40,000

Discount adjusted on allotment:

12,000 × ₹ 5 = ₹ 60,000

Therefore, cash received on allotment:

₹ 2,40,000 − ₹ 60,000 = ₹ 1,80,000

Balance after three months:

₹ 100 − ₹ 25 − ₹ 20 = ₹ 55

12,000 × ₹ 55 = ₹ 6,60,000