Question

Record necessary journal entries in the following case:

35,000, 7% debentures of Rs. 100 each issued at a 4% premium and redeemable at a premium of 5%.

Answer 1

Journal Entries
Date	Particulars	L.F.	Debit (₹)	Credit (₹)
1.	Bank A/c   ...Dr.		36,40,000	-
	To Debenture Application & Allotment A/c		-	36,40,000
	(Being application money received with 4% premium)
2.	Debenture Application & Allotment A/c   ...Dr.		36,40,000	-
	Loss on Issue of Debentures A/c   ...Dr.		1,75,000	-
	To 7% Debentures A/c		-	35,00,000
	To Securities Premium A/c		-	1,40,000
	To Premium on Redemption of Debentures A/c		-	1,75,000
	(Being debentures issued at a premium and redeemable at a premium)

Working Note:

Total Face Value = 35,000 × 100

= 35,00,000

Discount on Issue = `35,00,000 xx 4/100`

= 1,40,000

Premium on Redemption = `35,00,000 xx 5/100`

= 1,75,000