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Question
MK Ltd. has outstanding Rs. 30,000 11% debentures of Rs. 100 each redeemable at 10% premium as follows:
| March 31, 2018 - | 10,000 debentures |
| March 31, 2019 - | 12,000 debentures |
| March 31, 2020 - | Remaining debentures |
Pass necessary journal entries in the books of the company.
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Solution
| In the books of MK limited | ||||
| Date | Particulars | L.F. | Dr. (₹) | Cr. (₹) |
| 2017 | ||||
| Apr. 30 | Debenture Redemption Investment A/c ...Dr. | 1,50,000 | ||
| To Bank A/c | 1,50,000 | |||
| (Being amount invested) | ||||
| 2018 | ||||
| Mar. 31 | 11% Debenture A/c ...Dr. | 10,00,000 | ||
| Premium on redemption A/c ...Dr. | 1,00,000 | |||
| To Debenture holder | 11,00,000 | |||
| (Being amount transferred to debenture holder) | ||||
| Mar. 31 | Debenture holder A/c ...Dr. | 11,00,000 | ||
| To Bank A/c | 11,00,000 | |||
| (Being amount paid to debenture holder) | ||||
| Apr. 30 | Debenture Redemption Investment A/c ...Dr. | 30,000 | ||
| To Bank A/c | 30,000 | |||
| (Being received amount invested) | ||||
| 2019 | ||||
| Mar. 31 | 11% Debenture A/c ...Dr. | 12,00,000 | ||
| Premium on redemption A/c ...Dr. | 1,20,000 | |||
| To Debenture holder A/c | 13,20,000 | |||
| (Being amount transfer to debenture holder) | ||||
| Mar. 31 | Debenture holder A/c ...Dr. | 13,20,000 | ||
| To Bank A/c | 13,20,000 | |||
| (Being amount paid to debenture holder) | ||||
| Apr. 30 | Bank A/c ...Dr. | 60,000 | ||
| To Debenture Redemption Investment | 60,000 | |||
| (Being investment sold) | ||||
| 2020 | ||||
| Mar. 31 | Bank A/c ...Dr. | 1,20,000 | ||
| To Debenture Redemption Investment | 1,20,000 | |||
| (Being investment sold) | ||||
| Mar. 31 | 11% Debenture A/c ...Dr. | 8,00,000 | ||
| Premium on redemption | 80,000 | |||
| To Debenture holder A/c | 8,80,000 | |||
| (Being amount transfer to debenture holder) | ||||
| Mar. 31 | Debenture holder A/c ...Dr. | 8,80,000 | ||
| To Bank A/c | 8,80,000 | |||
| (Being amount paid to debenture holder) | ||||
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Long Answer Question
How is ‘Discount on Issue of Debentures’ treated in the books of accounts? How will you deal with the ‘discount in issue of debentures’ when the debentures are to be redeemed in instalments?
B. Ltd. issued debentures at 94% for Rs 4,00,000 on April 01, 2011 repayable by five equal drawings of Rs 80,000 each. The company prepares its final accounts on March 31 every year.
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A Ltd . issued 2,000; 9% Debentures of ₹ 100 each on the following terms:
₹20 on applications ;₹ 20 on allotment ; ₹ 30 on first call ; ₹ 30 on final call.
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Pass necessary Journal entries.
Alok Ltd. issued 7,000, 10% Debentures of ₹ 500 each at a premium of ₹ 50 per debenture redeemable at a premium of 10% after 5 years. According to the terms of issue, ₹ 200 was payable on application and balance on allotment.
Record necessary Journal entries at the time of issue of 10% Debentures.
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;
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Case (b): The debentures are issued at 20% premium.
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Pass Journal entries for the issue of these debentures.
Pass necessary Journal entries for the issue of debentures in the following cases:
- ₹ 40,000; 12% Debentures of ₹ 100 each issued at a premium of 5% redeemable at par.
- ₹ 70,000; 12% Debentures of ₹ 100 each issued at a premium of 5% redeemable at ₹ 110.
Office Products Ltd, issued on 1st April, 2018, 20,000, 9% Debentures of ₹ 100 each at a premium of 10% redeemable at a premium of 5% after 5 years. Issue price was payable along with application. Pass the necessary Journal entries.
Excess value of net assets over purchase consideration at the time of purchase of business is credited to ______.
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"
The debentures are issued with a specified rate of interest, which is called the coupon rate are known as which types of debentures?
A debenture is a ______.
Which of the following is true with regard to 10% Debentures issued at a discount of 20%?
Assertion (A): Debentures saves income tax.
Reason (R): Interest on debenture is tax deductible expenditure.
Debenture is ______.
XYZ Ltd. Issued 6,000, 12% Debentures of ? 50 each on April 1, 2014. Interest on these debenture is payable annually 3151 March each year. The debentures are redeemable in four equal installments at end of third, fourth, fifth and sixth year. You are required to pan journal entries at the time of issue and redemption of debentures in the books of the company under following cases:
- 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%.
