Question

Pass necessary journal entries for the issue of debentures for the following transactions:

1. XS Ltd. issued 40,000, 9% Debentures of ₹ 100 each at a premium of 10%, redeemable at a premium of 5%.
2. YG Ltd. issued 50,000, 9% Debentures of ₹ 100 each at par, redeemable at a premium of 10%.

Answer 1

i. Number of debentures = 40,000

Face value = ₹ 100 each

Face value of debentures: 40,000 × 100 = ₹ 40,00,000

Premium on issue @10%:

`40,00,000 xx 10/100 = ₹ 4,00,000`

Amount received:

40,00,000 + 4,00,000 = ₹ 44,00,000

Premium on redemption @5%:

`40,00,000 xx 5/100` = ₹ 2,00,000

Journal Entries In the Books of XS Ltd.
Date	Particulars	L.F.	Debit (₹)	Credit (₹)
1.	Bank A/c   ...Dr.		44,00,000
	Loss on Issue of Debentures A/c   ...Dr.		2,00,000
	To 9% Debentures A/c			40,00,000
	To Securities Premium A/c			4,00,000
	To Premium on Redemption of Debentures A/c			2,00,000
	(Being 40,000 debentures issued at 10% premium, redeemable at 5% premium)

ii. Number of debentures = 50,000

Face value = ₹ 100 each

Value of debentures: 50,000 × 100 = ₹ 50,00,000

Premium on redemption @10%:

`50,00,000 xx 10/100` = 5,00,000

Journal Entries In the books of YG Ltd.
Date	Particulars	L.F.	Debit (₹)	Credit (₹)
1.	Bank A/c   ...Dr.		50,00,000
	Loss on Issue of Debentures A/c   ...Dr.		5,00,000
	To 9% Debentures A/c			50,00,000
	To Premium on Redemption of Debentures A/c			5,00,000
	(Being 50,000 debentures issued at par, redeemable at 10% premium)