Question

Suvidha Ltd. purchased machinery for ₹ 1,98,000 from Suppliers Ltd. The payment was made by issue of 12% debentures of ₹ 100 each. Pass necessary journal entries for the purchase of machinery and issue of debentures when:

1. Debentures are issued at par.
2. Debentures are issued at a 10% discount.
3. Debentures are issued at a 10% premium.

Answer 1

i.

In the books of Suvidha Ltd.
Journal Entries
Date	Particulars	L.F.	Debit (₹)	Credit (₹)
1.	Machinery A/c  ...Dr.		1,98,000	-
	To Suppliers Ltd.		-	1,98,000
	(Being machinery purchased)
2.	Suppliers Ltd.  ...Dr.		1,98,000	-
	To 12% Debentures A/c		-	1,98,000
	(Being 12% Debentures issued to Suppliers Ltd.)

ii.

In the books of Suvidha Ltd.
Journal Entries
Date	Particulars	L.F.	Debit (₹)	Credit (₹)
1.	Suppliers Ltd.  ...Dr.		1,98,000	-
	Discount on Issue of Debentures A/c  ...Dr.		22,000	-
	To 12% Debentures A/c		-	2,20,000
	(Being 12% Debentures issued to Suppliers Ltd. at a 10% discount)

iii.

In the books of Suvidha Ltd.
Journal Entries
Date	Particulars	L.F.	Debit (₹)	Credit (₹)
1.	Suppliers Ltd.  ...Dr.		1,98,000	-
	To 12% Debentures A/c		-	1,80,000
	To Securities Premium Reserve A/c		-	18,000
	(Being 12% Debentures issued to Suppliers Ltd. at a 10% premium)

Working Notes:

(a) When Debentures are issued at a 10% Discount:

1. Face Value of Debenture = ₹100
2. Issue Price = ₹100 − 10% of ₹100
   = ₹90
3. Total Amount to be Paid = ₹1,98,000

Number of Debentures = `"₹1,98,000"/"₹90"` = 2,200 Debentures.

(b) When Debentures are issued at 10% Premium:

1. Face Value of Debenture = ₹100
2. Issue Price = ₹100 + 10% of ₹100
   = ₹110
3. Total Amount to be Paid = ₹1,98,000

Number of Debentures = `"₹1,98,000"/"₹110"` = 1,800 Debentures.