Question

A.Ltd. issued 50,00,000, 8% Debenture of Rs 100 at a discount of 6% on April 01, 2009 redeemable at premium of 4% by draw of lots as under:

20,00,000 Debentures on March, 2011

10,00,000 Debentures on March, 2013

20,00,000 Debentures on March, 2014

Compute the amount of discount to be written-off in each year till debentures are paid. Also prepare discount/loss on issue of debenture account.

Answer 1

Loss on issue of debenture = 6% (discount on issue) + 4% (premium on redemption) = 10%

`50,00,000 xx 100 xx 10/100 = 5,00,00,000`

At the end of	Debenture Outstanding	Ratio	Loss to be written off every year
March 2010	50,00,00,000	5	`5,00,00,000 xx 5/18`	=	1,38,88,889
March 2011	50,00,00,000	5	`5,00,00,000 xx 5/18`	=	1,38,88,889
March 2012	30,00,00,000	3	`5,00,00,000 xx 3/18`	=	83,33,333
March 2013	30,00,00,000	3	`5,00,00,000 xx 3/18`	=	83,33,333
March 2014	20,00,00,000	2	`5,00,00,000 xx 2/18`	=	55,55,556
		18			Rs 5,00,00,000

Loss on Issue of Debenture Account

Dr.							Cr.
Date	Particulars	J.F.	Amount Rs	Date	Particulars	J.F.	Amount Rs
2009 April 01	Debenture		5,00,00,000	2010 March 31	Profit and Loss		1,38,88,889
					Balance c/d		3,61,11,111
			5,00,00,000				5,00,00,000
2010 April 01	Balance b/d		3,61,11,111	2011 March 31	Profit and Loss		1,38,88,889
					Balance c/d		2,22,22,222
			3,61,11,111				3,61,11,111
2011 April 01	Balance b/d		2,22,22,222	2012 March 31	Profit and Loss		83,33,333
					Balance c/d		1,38,88,889
			2,22,22,222				2,22,22,222
2012 April 01	Balance b/d		1,38,88,889	2013 March 31	Profit and Loss		83,33,333
					Balance c/d		55,55,556
			1,38,88,889				1,38,88,889
2013 April 01	Balance b/d		55,55,556	2014 March 31	Profit and Loss		55,55,556
			55,55,556				55,55,556

Answer 2

Journal of A Ltd.
Date	Particulars	L.F.	Debit (₹)	Credit (₹)
2009
April 1	Bank A/c   ...Dr.		47,00,00,000
	To Debenture application and allotment			47,00,00,000
	(Being application money received)
April 1	Debenture application and allotment A/c		47,00,00,000
	Loss on issue of debenture		5,00,00,000
	To 8% Debenture			50,00,00,000
	To Premium on Redemption			2,00,00,000
	(Being amount transferred to debenture A/c)
2010
Mar. 31	Statement of profit and loss A/c   ...Dr.		5,00,00,000
	To loss on issue of debenture A/c			5,00,00,000
	(Being loss on issue charged to statement of profit and loss account)
2019
April 30	Debenture redemption Investment A/c    ...Dr.		3,00,00,000
	To Bank A/c			3,00,00,000
	(Being amount invested)
2020
Mar. 31	8% Debenture A/c   ...Dr.		20,00,00,000
	Premium on redemption A/c   ...Dr.		80,00,000
	To Debenture holder A/c			20,80,00,000
	(Being amount transfer to debenture holder A/c)
Mar. 31	8% Debenture holder A/c   ...Dr.		20,80,00,000
	To Bank A/c			20,80,00,000
	(Being amount paid to Debenture holder)
April 30	Bank A/c   ...Dr.		1,50,00,000
	To Debenture redemption Investment A/c			1,50,00,000
	(Being debenture Investment sold)
2021
Mar. 31	8% Debenture A/c   ...Dr.		10,00,00,000
	Premium on redemption A/c   ...Dr.		40,00,000
	To Debenture holder A/c			10,40,00,000
	(Being amount transfer to Debenture holder A/c)
Mar. 31	Debenture holder A/c   ...Dr.		10,40,00,000
	To Bank A/c			10,40,00,000
	(Being amount paid to debenture holder)
Apr. 30	Debenture Redemption Investment A/c    ...Dr.		1,50,00,000
	To Bank A/c			1,50,00,000
	(Being amount Invested)
2022
Mar. 31	Bank A/c   ...Dr.		3,00,00,000
	To Debenture Redemption Investment A/c			3,00,00,000
	(being Investment sold)
Mar. 31	8% Debenture A/c     ...Dr.		20,00,00,000
	Premium on Redemption A/c    ...Dr.		80,00,000
	To Debenture holder A/c			20,80,00,000
	(Being amount transfer to debenture holder A/c)
Mar. 31	Debenture holder A/c   ...Dr.		2,08,00,000
	To Bank A/c			2,08,00,000
	(Being amount paid to debenture holder)

 

Loss on Issue of Debenture A/c
Date	Particular	Amount	Date	Particular	Amount
2009			2010
April 1	To 8% Debenture A/c	5,00,00,000	Mar. 31	By Statement of Profit and loss A/c	5,00,00,000
		5,00,00,000			5,00,00,000