Question

Z Ltd. issued 15,00,000, 10% debentures of Rs. 50 each at a premium of 10% payable as Rs. 20 on application and the balance on allotment. Debentures are redeemable at par after 6 years. All the amount due on allotment was called and duly received. Record necessary entries when premium money is included:

1. in application money
2. in allotment money

Answer 1

Case (i)

Journal Entries
Date	Particulars	L.F.	Debit (₹)	Credit (₹)
1.	Bank A/c   ...Dr.		3,00,00,000	-
	To Debenture Application A/c		-	3,00,00,000
	(Being application money received for 15,00,000 debentures @ Rs. 20 each)
2.	Debenture Application A/c   ...Dr.		3,00,00,000	-
	To 10% Debentures A/c		-	2,25,00,000
	To Securities Premium A/c		-	75,00,000
	(Being application money transferred to 10% Debentures and Securities Premium account)
3.	Debenture Allotment A/c   ...Dr.		5,25,00,000	-
	To 10% Debentures A/c		-	5,25,00,000
	(Being allotment money due on 15,00,000 debentures @ Rs. 35 each)
4.	Bank A/c   ...Dr.		5,25,00,000	-
	To Debenture Allotment A/c		-	5,25,00,000
	(Being allotment money received)

Case (ii)

Journal Entries
Date	Particulars	L.F.	Debit (₹)	Credit (₹)
1.	Bank A/c   ...Dr.		3,00,00,000	-
	To Debenture Application A/c		-	3,00,00,000
	(Being application money received for 15,00,000 debentures @ Rs. 20 each)
2.	Debenture Application A/c   ...Dr.		3,00,00,000	-
	To 10% Debentures A/c		-	3,00,00,000
	(Being application money transferred to 10% Debentures account)
3.	Debenture Allotment A/c   ...Dr.		5,25,00,000	-
	To 10% Debentures A/c		-	4,50,00,000
	To Securities Premium A/c			75,00,000
	(Being allotment money due, including premium @ Rs. 5 per debenture)
4.	Bank A/c   ...Dr.		5,25,00,000	-
	To Debenture Allotment A/c		-	5,25,00,000
	(Being allotment money received)

Working Note:

Total Number of Debentures = 15,00,000

Face Value per Debenture = Rs. 50

Total Premium Rate (10% of Face Value) = `50 xx 10/100`

= Rs. 5 per debenture

Total Premium Amount = 15,00,000 × 5

= 75,00,000

Total Nominal Value (Face Value) = 15,00,000 × 50

= 7,50,00,000

Application money per debenture = premium + face value

= 5 + 15

= 20

Total Application money received = 15,00,000 × 20

= 3,00,00,000

Allotment money per debenture = 50 − 15

= 35

Total Allotment money received = 15,00,000 × 35

= 5,25,00,000