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Question
Bright Ltd. took over the assets of ₹ 6,60,000 and liabilities of ₹ 80,000 of Star Ltd. for an agreed purchase consideration of ₹ 6,00,000 payable 10% in cash and the balance by the issue of 12% Debentures of ₹ 100 each. Give necessary Journal entries in the books of Bright Ltd., assuming that:
Case (a): The debentures are issued at par.
Case (b): The debentures are issued at 20% premium.
Case (c): The debentures are issued at 10% discount.
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Solution
Books of Bright Ltd.
Journal
|
Date |
Particulars |
L.F. |
Debit Amount (₹) |
Credit Amount (₹) |
|
|
|
Assets A/c |
Dr. |
|
6,60,000 |
|
|
|
Goodwill A/c(Balancing Figure) |
Dr. |
|
20,000 |
|
|
|
To Liabilities A/c |
|
|
|
80,000 |
|
|
To Star Ltd. |
|
|
|
6,00,000 |
|
|
(Purchase of business of Star Ltd.) |
|
|
|
|
|
|
|
|
|
60,000 |
|
|
|
Star Ltd. |
Dr. |
|
|
60,000 |
|
|
To Cash A/c |
|
|
|
|
|
|
(Payment made in cash) |
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
Star Ltd. |
Dr. |
|
5,40,000 |
|
|
|
To 12% Debentures A/c |
|
|
|
5,40,000 |
|
|
( Purchase consideration discharged by issue of 12% Debentures) |
|
|
|
|
|
|
|
|
|
|
|
|
(b) |
Star Ltd. |
Dr. |
|
5,40,000 |
|
|
|
To 12% Debentures A/c |
|
|
|
4,50,000 |
|
|
To Security Premium Reserve A/c |
|
|
|
90,000 |
|
|
( Purchase consideration discharged by issue of 12% Debentures) |
|
|
|
|
|
|
|
|
|
|
|
|
(c) |
Star Ltd. |
Dr. |
|
5,40,000 |
|
|
|
Discount on Issue of Debentures A/c |
Dr. |
|
60,000 |
|
|
|
To 12% Debentures A/c |
|
|
|
6,00,000 |
|
|
( Purchase consideration discharged by issue of 12% Debentures) |
|
|
|
|
Working Note :
1) Number of Debentures to issued
= `540000/120 = 4500 "Debentures"`
2) Number of Debentures to issued
= `540000/90 = 6000 "debentures"`
RELATED QUESTIONS
What is meant by ‘Issue of debentures for Consideration other than Cash’?
What is meant by an ‘Irredeemable Debenture’?
What accounting treatment is given to the issue of debentures in the books of accounts?
B. Ltd. issued 1,000, 12% debentures of Rs 100 each on April 01, 2014, at a discount of 5% redeemable at a premium of 10%.
Give journal entries relating to the issue of debentures and debenture interest for the period ending March 31, 2015, assuming that interest is paid half-yearly on September 30 and March 31, and tax deducted at source is 10%.
Narain Laxmi Ltd. invited applications for issuing 7,500; 12% Debentures of ₹ 100 each at a premium of ₹ 35 per debenture. The issue price was payable on application. Issue was subscribed and allotment was made.
Pass necessary Journal entries for the above transactions in the books of Narain Laxmi 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.
Grown Ltd. issued 500, 10% Debentures of ₹ 1,000 each credited as fully paid-up to the promoters for their services to incorporate the company. It also issued 100, 10% Debentures of ₹ 1,000 each credited as fully paid-up to the underwriters towards their commission. Pass the Journal entries.
Journalise the following transaction at the time of issue of 12% Debentures:
Nandan Ltd. issued ₹90,000, 12% Debentures of ₹ 100 each at a discount of 5% redeemable at 110%.
On 1st April, 2025, V.V.L. Ltd. issued 1,000, 9% Debentures of ₹ 100 each at a discount of 6%, redeemable at a premium of 10% after three years. Pass necessary Journal entries for the issue of debentures and debenture interest for the year ended 31st March, 2026, if interest is payable on 30th September and 31st March. The company closes its books on 31st March every year.
[Hint: Amount received as Debentures Application and Allotment A/c = 1,000 × ₹ 94 = ₹ 94,000. Interest on 1,000 Debentures of ₹ 100 each for 6 months = ₹ 1,00,000 × 9/100 x 6/12 = ₹ 4,500.]
On 1st April, 2015. Mathew Ltd. issued 10,000, 9% Debentures of ₹ 100 each at a discount of 5%, redeemable at a premium of 5%. These debentures were redeemable as follows:
| On 31st March, 2016 | 2,000 Debentures; |
| On 31st March, 2017 | 5,000 Debentures; |
| On 31st March, 2018 | 3,000 Debentures. |
Prepare the Loss on Issue of Debentures Account, Debentures Account and Premium on Redemption of Debentures Account for three years.
X Co. Ltd. purchased assets worth Rs.28,80,000. It issued debentures of Rs. 100 each at a discount of 4 per cent in full satisfaction of the purchase consideration. The number of debentures issued to vendor is ______.
When debentures are issued at par and are redeemable at a premium, the loss on such an issue is debited to ______.
Premium on redemption is shown under which head until debentures are redeemed?
The debentures are issued with a specified rate of interest, which is called the coupon rate are known as which types of debentures?
Debenture interest is paid as ______.
The loss on issue of Debentures is written-off from ______.
Pick the odd one out.
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.
X Ltd. purchased assets of ₹ 18,00,000 and took over liabilities of ₹ 6,00,000 of Y Ltd. for a purchase consideration of ₹ 10,00,000. The payment to Y Ltd. was made by issue of 9% debentures of ₹ 100 each at ₹ 125. Calculate the number of 9% debentures issued in favour of Y Ltd. and pass the necessary journal entries for the above transactions in the books of X Ltd.
