Question

XYZ Ltd. Issued 6,000, 12% Debentures of ? 50 each on April 1, 2014. Interest on these debenture is payable annually 3151 March each year. The debentures are redeemable in four equal installments at end of third, fourth, fifth and sixth year. You are required to pan journal entries at the time of issue and redemption of debentures in the books of the company under following cases:

1. Debentures are issued at par and redeemable at par.
2. Debentures are issued at a premium of 10% and redeemable at par.
3. Debentures are issued at a discount of 10% and redeemable at par.
4. Debenture are issued at par but redeemable at a premium of 10%.
5. Debentures are issued at a premium of 10% and redeemable at premium of 10%.
6. Debenture are issued at a discount of 10% and redeemable at a premium of 10%.

Answer 1

(i) Debentures are issued at par and redeemable at par.

In the books of XYZ Ltd. Journal Entries
Date	Particulars	L.F.	Dr. (Rs.)	Cr. (Rs.)
1.	Bank A/c    ...Dr.		3,00,000
	To Debenture application and allotment A/c			3,00,000
	(Being debenture amount received)
2.	Debenture application and allotment A/c    ...Dr.		3,00,000
	To 12% Debenture A/c			3,00,000
	(Being amount transfer to debenture)
3.	12% Debenture A/c   ...Dr.		75,000
	To Debenture holder A/c			75,000
	(Being amount transfer to debenture holder)
4.	Debenture holder A/c  ...Dr.		75,000
	To Bank A/c			75,000
	(Being amount paid to debenture holder)

(ii) Debentures are issued at a premium of 10% and redeemable at par.

In the books of XYZ Ltd. Journal Entries
Date	Particulars	L.F.	Dr. (Rs.)	Cr. (Rs.)
1.	Bank A/c    ...Dr.		3,30,000
	To Debenture application and allotment A/c			3,30,000
	(Being debenture amount received)
2.	Debenture application and allotment A/c    ...Dr.		3,30,000
	To 12% Debenture A/c			3,00,000
	To Securities Premium A/c			30,000
	(Being amount transfer to debenture)
3.	12% Debenture A/c   ...Dr.		75,000
	To Debenture holder A/c			75,000
	(Being amount transfer to debenture holder)
4.	Debenture holder A/c  ...Dr.		75,000
	To Bank A/c			75,000
	(Being amount paid to debenture holder)

(iii) Debentures are issued at a discount of 10% and redeemable at par.

In the books of XYZ Ltd. Journal Entries
Date	Particulars	L.F.	Dr. (Rs.)	Cr. (Rs.)
1.	Bank A/c    ...Dr.		2,70,000
	To Debenture application and allotment A/c			2,70,000
	(Being debenture amount received)
2.	Debenture application and allotment A/c    ...Dr.		2,70,000
	Loss on issue of Debenture A/c  ...Dr.		60,000
	To 12% Debenture A/c			3,00,000
	To Premium on Redemption A/c			30,000
	(Being amount transfer to debenture)
3.	12% Debenture A/c   ...Dr.		75,000
	Premium on Redemption A/c  ...Dr.		7,500
	To Debenture holder A/c			82,500
	(Being amount transfer to debenture holder)
4.	Debenture holder A/c  ...Dr.		82,500
	To Bank A/c			82,500
	(Being amount paid to debenture holder)

(iv) Debenture are issued at par but redeemable at a premium of 10%.

In the books of XYZ Ltd. Journal Entries
Date	Particulars	L.F.	Dr. (Rs.)	Cr. (Rs.)
1.	Bank A/c    ...Dr.		3,00,000
	To Debenture application and allotment A/c			3,00,000
	(Being debenture amount received)
2.	Debenture application and allotment A/c    ...Dr.		3,00,000
	Loss on issue of Debenture A/c  ...Dr.		30,000
	To 12% Debenture A/c			3,00,000
	To Premium on Redemption A/c			30,000
	(Being amount transfer to debenture)
3.	12% Debenture A/c   ...Dr.		75,000
	Premium on Redemption A/c  ...Dr.		7,500
	To Debenture holder A/c			82,500
	(Being amount transfer to debenture holder)
4.	Debenture holder A/c  ...Dr.		82,500
	To Bank A/c			82,500
	(Being amount paid to debenture holder)

(v) Debentures are issued at a premium of 10% and redeemable at premium of 10%.

In the books of XYZ Ltd. Journal Entries
Date	Particulars	L.F.	Dr. (Rs.)	Cr. (Rs.)
1.	Bank A/c    ...Dr.		3,30,000
	To Debenture application and allotment A/c			3,30,000
	(Being debenture amount received)
2.	Debenture application and allotment A/c    ...Dr.		3,30,000
	Loss on issue of Debenture A/c  ...Dr.		30,000
	To 12% Debenture A/c			3,00,000
	To Securities Premium A/c			30,000
	To Premium on Redemption A/c			30,000
	(Being amount transfer to debenture)
3.	12% Debenture A/c   ...Dr.		75,000
	Premium on Redemption A/c  ...Dr.		7,500
	To Debenture holder A/c			82,500
	(Being amount transfer to debenture holder)
4.	Debenture holder A/c  ...Dr.		82,500
	To Bank A/c			82,500
	(Being amount paid to debenture holder)

(vi) Debenture are issued at a discount of 10% and redeemable at a premium of 10%.

In the books of XYZ Ltd. Journal Entries
Date	Particulars	L.F.	Dr. (Rs.)	Cr. (Rs.)
1.	Bank A/c    ...Dr.		2,70,000
	To Debenture application and allotment A/c			2,70,000
	(Being debenture amount received)
2.	Debenture application and allotment A/c    ...Dr.		2,70,000
	Discount on issue of Debenture A/c  ...Dr.		30,000
	To 12% Debenture A/c			3,00,000
	(Being amount transfer to debenture)
3.	12% Debenture A/c   ...Dr.		75,000
	To Debenture holder A/c			75,000
	(Being amount transfer to debenture holder)
4.	Debenture holder A/c  ...Dr.		75,000
	To Bank A/c			75,000
	(Being amount paid to debenture holder)