Question

Pass necessary Journal entries in the books of RR Ltd. for issue of debentures in the following case:

Issued 9,000, 9% Debentures of 100 each at a discount of 10%, redeemable at a premium of 5% after 5 years.

Answer 1

Journal Entries
Date	Particulars	L.F.	Debit (₹)	Credit (₹)
1.	Bank A/c   ...Dr.		8,10,000
	To Debentures Application and Allotment A/c			8,10,000
	(Being application and allotment money received)
2.	Debentures Application and Allotment A/c   ...Dr.		8,10,000
	Loss on Issue of Debentures A/c   ...Dr.		1,35,000
	To 9% Debentures A/c			9,00,000
	To Premium on Redemption of Debentures A/c			45,000
	(Being 9% Debentures issued at 10% discount and redeemable at 5% premium after 5 years)

Working note:

Face Value:

9,000 × ₹ 100 = ₹ 9,00,000

Discount on Issue:

₹ 9,00,000 × 10% = ₹ 90,000

Amount Received:

₹ 9,00,000 − ₹ 90,000 = ₹ 8,10,000

Premium on Redemption:

₹ 9,00,000 × 5% = ₹ 45,000

Loss on Issue of Debentures:

₹ 90,000 + ₹ 45,000 = ₹ 1,35,000