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Question
Record necessary journal entries in the following case:
25,000, 7% debentures of Rs. 100 each issued at par, redeemable at 4% premium.
Journal Entry
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Solution
| Journal Entries | ||||
| Date | Particulars | L.F. | Debit (₹) | Credit (₹) |
| 1. | Bank A/c ...Dr. | 25,00,000 | - | |
| To Debenture Application & Allotment A/c | - | 25,00,000 | ||
| (Being application money received) | ||||
| 2. | Debenture Application & Allotment A/c ...Dr. | 25,00,000 | - | |
| Loss on Issue of Debentures A/c ...Dr. | 1,00,000 | - | ||
| To 7% Debentures A/c | - | 25,00,000 | ||
| To Premium on Redemption of Debentures A/c | - | 1,00,000 | ||
| (Being debentures issued with a redemption premium liability) | ||||
Working Note:
Total Face Value = 25,000 × 100
= 25,00,000
Premium on Redemption = `25,00,000 × 4/100`
= 1,00,000
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