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Question
On July 01, 2022, Panther Ltd. issued 20,000, 9% Debentures of ₹ 100 each at 8% premium and redeemable at a premium of 15% in four equal instalments starting from the end of the third year. The balance in Securities Premium on the date of issue of debentures was ₹ 80,000. Interest on debentures was to be paid on March 31 every year.
Pass Journal entries for the financial year 2022-23. Also prepare Loss on Issue of Debentures account.
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Solution
| Journal Entries in the Books of Panther Ltd. | ||||
| Date | Particulars | L.F | Debit (₹) | Credit (₹) |
| July 1 2022 | Bank A/c ...Dr. | 21,60,000 | ||
| To Debenture Application and Allotment A/c | 21,60,000 | |||
| (Being Application money received) | ||||
| July 1 2022 | Debenture Application and Allotment ...Dr. | 21,60,000 | ||
| Loss on Issue of Debentures A/c ...Dr | 3,00,000 | |||
| To 9% Debentures A/c | 20,00,000 | |||
| To Securities Premium A/c | 1,60,000 | |||
| To Premium on Redemption of Debentures A/c | 3,00,000 | |||
| (Being Debentures issued) | ||||
| Mar. 31 2022 | Debenture Interest A/c ...Dr | 1,35,000 | ||
| To Debenture holders A/c | 1,35,000 | |||
| (Being Interest due on debentures) | ||||
| Mar. 31 2022 | Debenture holders A/c ...Dr. | 1,35,000 | ||
| To Bank A/c | 1,35,000 | |||
| (Being interest paid to debenture holders) | ||||
| Mar. 31 2022 | Statement of Profit and Loss ...Dr. | 1,35,000 | ||
| To Debenture Interest A/c | 1,35,000 | |||
| (Interest on Debentures charged from Statement of Pnl) | ||||
| Mar. 31 2022 | Securities Premium A/c ...Dr. | 2,40,000 | ||
| Statement of Profit and Loss ...Dr. | 60,000 | |||
| To Loss on Issue of Debentures A/c | 3,00,000 | |||
| (Loss on Issue of Debentures written off) | ||||
| Loss on Issue of Debentures A/c | |||||
| Date | Particulars | Amount (₹) | Date | Particulars | Amount (₹) |
| 01 July 2022 | To Premium on Redemption of Debentures A/c | 3,00,000 | 31 Mar. 2023 | By Securities Premium A/c | 2,40,000 |
| 31 Mar. 2023 | By Statement of Profit and Loss | 60,000 | |||
| 3,00,000 | 3,00,000 | ||||
RELATED QUESTIONS
On 1.4.2015, MKM Ltd. issued 12,000, 11% debentures of `100 each at a discount of 8%, redeemable at a premium of 10% after three years. The company closes its books on 31st March every year. Interest on 11% debentures is payable on 30th September and 31st March every year. The rate of tax deducted at source is 10%.
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(1) Issue 47,500 equity shares at a premium of Rs 100 per share.
(2) Obtain a long-term loan from the bank which was available at 12% per annum.
(3) Issue 9% debentures at a discount of 5%.
After evaluating these alternatives the company decided to issue 1,00,000, 9% debentures on 1.4.2008. The face value of each debenture was Rs 100. These debentures were redeemable in four installments starting from the end of the third year, which was as follows:
| Year | Rs |
| III | 10,00,000 |
| IV | 20,00,000 |
| V | 30,00,000 |
| VI | 40,00,000 |
Prepare 9% debenture account from 1.4.2008 till all the debentures were redeemed.
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On Allotment − Rs 5 per share (including Rs 2 premium)
On First call − Rs 5 per share (including Rs 3 premium)
On Second and final call − Balance amount
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Pass necessary Journal Entries in the books of the company for the above transactions.
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Pass necessary Journal entries for the following transaction in the books of Fortune Ltd:
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Answer in a sentence only.
What is meant by ‘Issue of debenture at discount and redeemable at premium’?
Answer in a sentence only.
What is meant by ‘Premium on Redemption of debentures?
Write one word/term/phrase which can substitute the following
The issue of debentures more than face value of debentures
Select most appropriate alternative from those given below :
The issue of debentures less than the face value is called ___________.
State to whether the following statement is True/False.
The issue of debentures less than face value of debenture to termed as issue of debentures at discount.
State to whether the following statement is True/False.
The issue of debenture more than face value is termed on issue of debentures at par.
State to whether the following statement is True/False.
Premium on issue of debentures is recorded on the asset side of balance sheet.
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On Application Rs 40
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