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Question
Sangam Ltd. issued 20,000; 9% Debentures of ₹ 100 each on the following terms:
₹ 20 on application; ₹ 20 on allotment; ₹ 30 on first call; ₹ 30 on second and final call.
Applications were received for 24,000 debentures. Applications for 18,000 debentures were accepted in full. Applications for 4,000 debentures were allotted 2,000 debentures and applications for 2,000 debentures were refused allotment.
Pass necessary Journal entries.
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Solution
| Journal Entries In the Books of Sangam Ltd. |
||||
|---|---|---|---|---|
| Date | Particulars | L.F. | Dr. (₹) | Cr. (₹) |
| 1. | Bank A/c ...Dr. | 4,80,000 | ||
| To Debentures Application A/c | 4,80,000 | |||
| (Application money received on 24,000 debentures) | ||||
| 2. | Debentures Application A/c ...Dr. | 4,80,000 | ||
| To 9% Debentures A/c | 4,00,000 | |||
| To Debentures Allotment A/c | 40,000 | |||
| To Bank A/c | 40,000 | |||
| (Application money transferred, excess application money adjusted towards allotment and money on rejected applications refunded) | ||||
| 3. | Debentures Allotment A/c ...Dr. | 4,00,000 | ||
| To 9% Debentures A/c | 4,00,000 | |||
| (Allotment money due on 20,000 debentures) | ||||
| 4. | Bank A/c ...Dr. | 3,60,000 | ||
| To Debentures Allotment A/c | 3,60,000 | |||
| (Allotment money received after adjustment of excess application money) | ||||
| 5. | Debentures First Call A/c ...Dr. | 6,00,000 | ||
| To 9% Debentures A/c | 6,00,000 | |||
| (First call money due @ ₹ 30 per debenture) | ||||
| 6. | Bank A/c ...Dr. | 6,00,000 | ||
| To Debentures First Call A/c | 6,00,000 | |||
| (First call money received) | ||||
| 7. | Debentures Second and Final Call A/c ...Dr. | 6,00,000 | ||
| To 9% Debentures A/c | 6,00,000 | |||
| (Second and final call money due @ ₹ 30 per debenture) | ||||
| 8. | Bank A/c ...Dr. | 6,00,000 | ||
| To Debentures Second and Final Call A/c | 6,00,000 | |||
| (Second and final call money received) | ||||
Working Note:
Application money received:
24,000 × ₹ 20 = ₹ 4,80,000
Application money required on 20,000 debentures:
20,000 × ₹ 20 = ₹ 4,00,000
For applicants of 4,000 debentures who were allotted 2,000 debentures:
4,000 × ₹ 20 = ₹ 80,000
Application money required:
2,000 × ₹ 20 = ₹ 40,000
Excess application money adjusted towards allotment:
₹ 80,000 − ₹ 40,000 = ₹ 40,000
Refund to applicants of 2,000 debentures:
2,000 × ₹ 20 = ₹ 40,000
Allotment money due:
20,000 × ₹ 20 = ₹ 4,00,000
Cash received on allotment:
₹ 4,00,000 − ₹ 40,000 = ₹ 3,60,000
