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Question
Suhas Ltd. issued 1,000, 7% Debentures of ₹ 100 each to be redeemed after three years at a premium of 5%. The face value of the debentures was payable as:
₹ 20 on Application
₹ 30 on Allotment (on 1st May, 2020)
₹ 30 on First call (on 1st October, 2020)
₹ 20 on Final call (on 1st January, 2021)
All the debentures were applied and allotted.
Ali, to whom 20 debentures were allotted, paid the allotment money and the two calls on 31st March, 2021. The Articles of Association of the company provided for interest on calls-in-arrear to be charged @ 10% per annum, which Ali paid on 31st March, 2021.
You are required to pass journal entries in the books of Suhas Ltd. to record:
- The adjustment and receipt of interest on calls in arrears
- The entry to close the interest on calls in arrears account
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Solution
| In the Books of Suhas Ltd. Journal Entry |
||||
| Date | Particulars | L.F. | Debit (₹) | Credit (₹) |
| 2021 March 31 |
Debentureholders A/c Dr. To Interset on Cells in Arrears A/c (Being interest due) |
95 | 95 | |
| 2021 March 31 |
Bank A/c Dr. To Debentureholders A/c (Being interest received) |
95 | 95 | |
| March 31 2021 |
Interest on calls in Arrears A/c Dr. To Statement of Profit and Loss (Being interest on calls in arrears account closed) |
95 | 95 | |
Working Note:
Calculation of Interest on Calls in Arrears = `600 xx 10/100 xx 11/12 + 600 xx 10/100 xx 6/12 + 400 xx 10/100 xx 3/12`
= 55 + 30 + 10
= ₹ 95
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Answer in a sentence only.
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