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Question
On 31 March, 2017, Janta Ltd. converted its Rs. 88,00,000, 6% debentures into equity shares of Rs. 20 each at a premium of Rs. 2 per share. Record necessary journal entries in the books of the company for redemption of debentures.
Journal Entry
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Solution
| Journal of Janta Ltd. | ||||
| Date | Particulars | L.F. | Debit (₹) | Credit (₹) |
| 2017 | ||||
| Mar 31 | 6% Debentures A/c ...Dr. | 88,00,000 | - | |
| To Debentureholders A/c | 88,00,000 | |||
| (Being the amount due to debentureholders on redemption at par) | ||||
| Mar 31 | Debentureholders A/c ...Dr. | 88,00,000 | - | |
| To Equity Share Capital A/c | - | 80,00,000 | ||
| To Securities Premium Account | - | 8,00,000 | ||
| (Being the liability settled by issuing 4,00,00,0 equity shares of Rs. 20 each at a premium of Rs. 2 per share) | ||||
Working Notes:
Issue Price per Share = Face Value + Securities Premium
= 20 + 2
= 22
Number of Equity Shares = `"Total Amount Due"/"Issue Price per Share"`
= `(88,00,000)/22`
= 4,00,000
Nominal Value (Equity Share Capital) = 4,00,000 × 20
= 80,00,000
Securities Premium Reserve Amount = 4,00,000 × 2
= 8,00,000
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