Question

Kinetic Ltd. issued 9% Debentures of ₹ 100 each at a premium of 20% to Vendors for purchase of plant costing ₹ 6,00,000. Pass the necessary Journal entry for the payment made to vendors.

Answer 1

Journal Entries In the Books of Kinetic Ltd.
Date	Particulars	L.F.	Dr. (₹)	Cr. (₹)
	Vendors A/c   ...Dr.		6,00,000
	To 9% Debentures A/c			5,00,000
	To Securities Premium A/c			1,00,000
	(5,000, 9% Debentures of ₹ 100 each issued at 20% premium to vendors in payment for plant)

Working note:

Issue price of each debenture:

₹ 100 + 20% = ₹ 120

Number of debentures issued:

`(6,00,000)/120 = 5,000` Debentures

Face value:

5,000 × ₹ 100 = ₹ 5,00,000

Securities Premium:

5,000 × ₹ 20 = ₹ 1,00,000