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Ain 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. - CBSE (Arts) Class 12 - Accountancy

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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.

Solution

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.

  Is there an error in this question or solution?

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Solution Ain 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. Concept: Types of Shares - Preference Shares Equity Shares.
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