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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
RELATED QUESTIONS
What is meant by ‘Issue of debentures for Consideration other than Cash’?
Short Answer Question
Name the head under which ‘discount on issue of debentures’ appears in the Balance Sheet of a company.
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- 10,000 12% debentures of Rs. 100 each at par but redeemable at a premium of 5% after 5 years;
- 10,000 12% debentures of Rs. 100 each at a discount of 10% but redeemable at par after 5 years;
- 5,000 12% debentures of Rs. 1,000 each at a premium of 5% but redeemable at par after 5 years;
- 1,000 12% debentures of Rs. 100 each issued to a supplier of machinery costing Rs. 95,000. The debentures are repayable after 5 years and
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Pass the journal entries to record the: (a) issue of debentures, and (b) repayment of debentures after the given period.
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The company decided to issue 1,000 6% Debentures of ₹ 100 each to Amrit and Bhaskar, each for their services in incorporating the company.
Pass journal entry.
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(c) A debenture issued at ₹95, repayable at ₹ 105.
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XYZ Ltd.issued 5,000 , 10% Debentures of ₹ 100 each on 1st April, 2015 at a discount of 10% redeemable at a premium of 10% after 4 years. Give journal entries for the year ended 31st March, 2016, assuming that the interest was payable half-yearly on 30th September and 31st March. Tax is to be deducted @ 10%.
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Pass Journal entries. Also give Journal entries for writing off Loss on Issue of Debentures.
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"Writing off the loss on issue of debentures"
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Interest on Debentures is a charge against ______.
Assertion (A): Issue of debenture does not result in dilution of interest of equity shareholders.
Reason (R): Debenture holders have voting rights.
10% Debenture issued at ₹ 105 is repayable at ₹ 110, the face value of the debenture being ₹ 100. Calculate the amount of loss on redemption of debentures.
Debenture holders are the ______.
Premium received on issue of debentures may be utilised for:
X Ltd. had outstanding 20,000 12% debentures of Rs. 100 each redeemable on June 30, 2019. Record necessary journal entries at the time of redemption.
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- Debentures are issued at par and redeemable at par.
- Debentures are issued at a premium of 10% and redeemable at par.
- Debentures are issued at a discount of 10% and redeemable at par.
- Debenture are issued at par but redeemable at a premium of 10%.
- Debentures are issued at a premium of 10% and redeemable at premium of 10%.
- Debenture are issued at a discount of 10% and redeemable at a premium of 10%.
