Question

X Ltd. raised a bank loan of ₹ 10,00,000 and issued by way of collateral security 10,000, 12% Debentures of ₹ 100 each. The Company further issued to public 15,000, 12% Debentures of ₹ 100 each at a 2% discount, payable ₹ 30 on application, ₹18 on allotment, ₹ 20 on first call and the balance a month later. The public applied for 20,000 debentures. Applications for 12,000 debentures were accepted in full, applications for 4,000 debentures were allotted 3,000 debentures and the remaining applications were rejected. All amounts were duly received. Prepare journal entries and show the Balance Sheet.

Answer 1

In the Books of X Ltd.
Journal Entries
Date	Particulars	L.F.	Debit (₹)	Credit (₹)
1.	Bank A/c   ...Dr.		10,00,000	-
	To Bank Loan A/c		-	10,00,000
	(Being a loan taken, secured by the issue of 10,000 debentures as collateral security.)
2.	Debenture Suspense A/c   ...Dr.		10,00,000	-
	To 12% Debentures A/c		-	10,00,000
	(Being an issue of debentures as collateral security.)
3.	Bank A/c   ...Dr.		6,00,000	-
	To Debenture Application A/c		-	6,00,000
	(Being application money received for 20,000 debentures @ ₹30.)
4.	Debenture Application A/c   ...Dr.		6,00,000	-
	To 12% Debentures A/c		-	4,50,000
	To Debentrue Allotment A/c		-	30,000
	To Bank A/c (Refund)		-	1,20,000
	(Being the transfer of application money and refund of excess.)
5.	Debenture Allotment A/c   ...Dr.		2,70,000	-
	Discount on Issue of Debentures A/c   ...Dr.		30,000	-
	To 12% Debentures A/c		-	3,00,000
	(Being allotment due on 15,000 debentures @ ₹18; discount allowed.)
6.	Bank A/c   ...Dr.		2,40,000	-
	To Debenture Allotment A/c		-	2,40,000
	(Being allotment money received.)
7.	Debenture First Call A/c   ...Dr.		3,00,000	-
	To 12% Debentures A/c		-	3,00,000
	(Being first call money due on 15,000 debentures @ 30 per debenture)
8.	Bank A/c   ...Dr.		3,00,000	-
	To Debenture First Call A/c		-	3,00,000
	(Being the first call money received @ ₹20 per debenture on 15,000 debentures.)
9.	Debenture Final Call		4,50,000	-
	To 12% Debentures		-	4,50,000
	(Being inl cal money due on 15,000 debentures ® 220 per |debenture)
10.	Bank A/c   ...Dr.		4,50,000	-
	To Debenture Final Call A/c		-	4,50,000
	(Being final call received @ ₹30 per debenture.)

 

Balance Sheet of X Ltd. (Extract)
	Particulars	Note No.	Amount (₹)
I.	EQUITY AND LIABILITIES
	1. Shareholder’s Funds
	Reserves and Surplus	1	(30,000)
	2. Non-Current Liabilities
	Long-term Borrowings	2	25,00,000
II.	ASSETS
	1. Current Assets
	Cash and Bank Balance	3	24,70,000

Working Notes to Accounts:

	Particulars	Amount (₹)	Amount (₹)
(1)	Reserve and Surplus:
	Statement of Profit & Loss Balance	(30,000)
	(Discount on Issue of Debentures)
(2)	Long-term Borrowings:
	25,000, 12% Debentures of ₹100 each	25,00,000
	Less: Debenture Suspense A/c	10,00,000
		15,00,000
	Bank Loan	10,00,000
		25,00,000
(3)	Cash & Bank Balance:
	Cash at Bank	24,70,000