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Question
Alka Ltd. issued 5,000, 10% Debentures of ₹ 1,000 each at a discount of 10% redeemable after 5 years. According to the terms of issue, ₹ 500 (after discount of ₹ 50) was payable on application and the balance amount on allotment of debentures. Record necessary entries regarding issue of 10% Debentures.
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Solution
| Journal Entries In the Books of Alka Ltd. |
||||
|---|---|---|---|---|
| Date | Particulars | L.F. | Dr. (₹) | Cr. (₹) |
| 1. | Bank A/c ...Dr. | 25,00,000 | ||
| To Debentures Application A/c | 25,00,000 | |||
| (Application money received @ ₹ 500 per debenture) | ||||
| 2. | Debentures Application A/c ...Dr. | 25,00,000 | ||
| Discount on Issue of Debentures A/c ...Dr. | 2,50,000 | |||
| To 10% Debentures A/c | 27,50,000 | |||
| (Application money transferred and discount of ₹ 50 per debenture recorded) | ||||
| 3. | Debentures Allotment A/c ...Dr. | 20,00,000 | ||
| Discount on Issue of Debentures A/c ...Dr. | 2,50,000 | |||
| To 10% Debentures A/c | 22,50,000 | |||
| (Allotment money due after adjustment of discount of ₹ 50 per debenture) | ||||
| 4. | Bank A/c ...Dr. | 20,00,000 | ||
| To Debentures Allotment A/c | 20,00,000 | |||
| (Allotment money received @ ₹ 400 per debenture) | ||||
Working note:
Face value of debentures:
5,000 × ₹ 1,000 = ₹ 50,00,000
Total discount @ 10%:
₹ 50,00,000 × 10% = ₹ 5,00,000
On application, ₹ 500 is payable after discount of ₹ 50. Therefore, nominal amount due on application:
₹ 500 + ₹ 50 = ₹ 550
Balance nominal amount due on allotment:
₹ 1,000 − ₹ 550 = ₹ 450
Remaining discount on allotment:
₹ 100 − ₹ 50 = ₹ 50
Hence, cash payable on allotment:
₹ 450 − ₹ 50 = ₹ 400
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