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Question
Bright Ltd. issued 5,000; 10% Debentures of ₹ 100 each on 1st April, 2015 . The issue was fully subscribed . According to the terms of issue, interest on the debentures is payable half-yearly on 30th September and 31st March and the tax deducted at source is 10%.
Pass necessary journal entries related to the debenture interest for the year ending 31st March , 2016 and transfer of interest on debentures of the year to the Statement of Profit and Loss .
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Solution
Journal
In the books of Bright Ltd.
|
Date |
Particulars |
L.F. |
Debit Amount (Rs) |
Credit Amount (Rs) |
|
|
2016 |
|
|
|
|
|
|
Mar. 31 |
Debentures Interest A/c |
Dr. |
|
25,000 |
|
|
|
To Debenture Holder’s A/c |
|
|
|
22,500 |
|
|
To Income Tax Payable A/c |
|
|
|
2,500 |
|
|
(Debentures interest due) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Debenture Holder’s A/c |
Dr. |
|
22,500 |
|
|
|
Income Tax Payable A/c |
|
|
2,500 |
|
|
|
To Bank A/c |
|
|
|
25,000 |
|
|
(Interest on debentures paid) |
|
|
|
|
|
|
|
|
|
|
|
|
Mar. 31 |
Statement of Profit & Loss A/c |
Dr. |
|
50,000 |
|
|
|
To Debentures Interest A/c |
|
|
|
50,000 |
|
|
(Interest transferred to profit and loss) |
|
|
|
|
RELATED QUESTIONS
State the meaning of ‘Debentures issued as Collateral Security’.
What is ‘Capital Reserve’?
What is the discount on the issue of debentures?
Long Answer Question
Explain the different terms for the issue of debentures with reference to their redemption.
B. Ltd. purchased assets of the book value of Rs. 4,00,000 and took over the liability of Rs. 50,000 from Mohan Bros. It was agreed that the purchase consideration, settled at Rs. 3,80,000, be paid by issuing debentures of Rs 100 each.
What Journal entries will be made in the following three cases, if debentures are issued: (a) at par; (b) at discount; (c) at a premium of 10%? It was agreed that any fraction of debentures be paid in cash.
(Note: Goodwill Rs. 30,000)
Iron Products Ltd. issued 5,000; 9% Debentures of ₹ 100 each at a premium of ₹ 40 payable as follows;
(i) ₹ 40 , including premium of ₹ 10 on applications;
(ii) ₹ 45, including premium of ₹ 15 on allotment ; and
(iii) Balance as first and final call.
The issue was subscribed and allotment made. Calls were made and due amount was received .
Pass Journal entries .
Romi Ltd. acquired assets of ₹ 20 lakhs and took over creditors of ₹ 2 lakhs from Kapil Enterprises.
Romi Ltd. issued 8% Debentures of ₹ 100 each at a discount of 10% as purchase consideration.
Record necessary journal entries in the books of Romi Ltd.
Wellbeing Ltd. took over assets of ₹ 9,80,000 and liabilities of ₹ 40,000 of HDR Ltd. at an agreed value of ₹ 9,00,000. Wellbeing Ltd. paid to HDR Ltd. by issue of 9% Debentures of ₹ 100 each at a premium of 20%. Pass necessary Journal entries to record the above transactions in the books of Wellbeing Ltd.
Exe Ltd. purchased the assets of the book value ₹4,00,000 and took over the liabilities of ₹ 50,000 from Mohan Bros.It was agreed that the purchase consideration ,settled at ₹3,80,000 be paid by issuing debentures of ₹ 100 each.
Pass journal entries if debenture are issued:
(a) at par
(b) at a discount of 10% and
(c) at a premium of 10%.
It was agreed that any fraction of debentures be paid in cash.
Pass necessary Journal entries relating to the issue of debentures for the following:
(a) Issued ₹ 28,000; 10% Debentures of ₹ 100 each at a premium of 15% redeemable at par.
(b) Issued ₹ 30,000; 10% Debentures of ₹ 100 each at a premium of 10% and redeemable at a premium of 15%.
(c) Issued ₹ 80,000; 10% Debentures of ₹ 100 each at par repayable at a premium of 10%.
Pass necessary Journal entries for the issue of Debentures in the following cases:
(a) ₹ 40,000; 15% Debentures of ₹ 100 each issued at a discount of 10% redeemable at par.
(b) ₹ 80,000; 15% Debentures of ₹ 100 each issued at a premium of 10% redeemable at a premium of 10%.
Excess value of net assets over purchase consideration at the time of purchase of business is credited to ______.
When debentures are issued at a discount and are redeemable at a premium, which of the following accounts is debited at the time of issue?
Which of the following given statement is correct.
Statement 1 - "Shares cannot be converted into debentures whereas debentures can be converted into shares"
Statement 2 - "Shares can be converted into debentures whereas debentures cannot be converted into shares"
Loss on Issue of Debenture Account is shown:
Debentures are considered as ______ equity.
Which of the following is false with respect to debentures ?
Which of the following is not a characteristic of Bearer Debentures?
A Ltd. took over the assets of ₹ 6,60,000 and liabilities of ₹ 80,000 of B Ltd. for an agreed purchase consideration of ₹ 6,00,000 payable 10% in cash and the balance by the issue of 15% debentures of ₹ 100 each at 10% discount. The number of debentures to be issued is:
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.
