Double Entry Book Keeping Ts Grewal Vol. II 2019 Solutions for Class 12 Commerce Accountancy Chapter 9 Issue Of Debentures are provided here with simple step-by-step explanations. These solutions for Issue Of Debentures are extremely popular among Class 12 Commerce students for Accountancy Issue Of Debentures Solutions come handy for quickly completing your homework and preparing for exams. All questions and answers from the Double Entry Book Keeping Ts Grewal Vol. II 2019 Book of Class 12 Commerce Accountancy Chapter 9 are provided here for you for free. You will also love the ad-free experience on Meritnation’s Double Entry Book Keeping Ts Grewal Vol. II 2019 Solutions. All Double Entry Book Keeping Ts Grewal Vol. II 2019 Solutions for class Class 12 Commerce Accountancy are prepared by experts and are 100% accurate.

Page No 9.51:

Question 1:

Vishwas Ltd. issued 2,000; 9% Debentures of ₹ 100 each payable as follows:
₹ 25 on application; ₹ 25 on allotment and ₹ 50 on first and final call.
Applications were received for all the debentures along with the application money did allotment was made . Call money was also received on the due date.
Pass necessary Journal entries in the books of the company.

Answer:

Books of Vishwas Ltd.

Journal

Date

Particulars

 

L.F.

Debit Amount

Rs

Credit Amount

Rs

 

Bank A/c

Dr.

 

50,000

 

 

To 9% Debenture Application A/c

 

 

50,000

 

(Debenture application money received for 2,000 debentures at Rs 25 each)

 

 

 

 

 

 

 

 

 

9% Debenture Application A/c

Dr.

 

50,000

 

 

To 9% Debenture A/c

 

 

50,000

 

(Debenture application money transferred to 9% Debentures A/c)

 

 

 

 

 

 

 

 

 

9% Debenture Allotment A/c

Dr.

 

50,000

 

 

To 9% Debentures A/c

 

 

50,000

 

(Debenture allotment money due on 2,000 Debentures at Rs 25 each)

 

 

 

 

 

 

 

 

 

Bank A/c

Dr.

 

50,000

 

 

To 9% Debenture Allotment A/c

 

 

50,000

 

(Debenture allotment money received)

 

 

 

 

 

 

 

 

 

9% Debenture First and Final Call A/c

Dr.

 

1,00,000

 

 

To 9% Debentures A/c

 

 

1,00,000

 

(Debenture first and final call money due on 2,000 debentures at Rs 50 each)

 

 

 

 

 

 

 

 

 

Bank A/c

Dr.

 

1,00,000

 

 

To 9% Debenture First and Final Call A/c

 

 

1,00,000

 

(Debenture first and final call received)

 

 

 

Page No 9.51:

Question 2:

A Ltd . issued 2,000; 9% Debentures of ₹ 100 each on the following terms:
₹20 on applications ;₹ 20 on allotment ; ₹ 30 on first call ; ₹ 30 on final call.
The public applied for 2,400 debentures. Applications for 1,800 debentures were accepted in full. Applications for 400 debentures were allotted 200 debentures  and applications for 200 debentures were rejected . Pass necessary Journal entries .

Answer:

Books of A Ltd.

Journal

Date

Particular

L.F.

Debit Amount

Rs

Credit Amount

Rs

 

Bank A/c

Dr.

 

48,000

 

 

To 9% Debenture Application A/c

 

 

48,000

 

(Debenture application money received for 2,400 debentures at Rs 20 each)

 

 

 

 

 

 

 

 

 

9% Debenture Application A/c

Dr.

 

48,000

 

 

To 9% Debentures A/c

 

 

40,000

 

To 9% Debentures Allotment A/c

 

 

4,000

 

To Bank A/c

 

 

4,000

 

(Debenture application money transferred to 9% Debenture account for 2,000 Debenture, adjusted to Debenture Allotment account for 200 Debentures and money refunded for 200 debentures)

 

 

 

 

 

 

 

 

 

9% Debenture Allotment A/c

Dr.

 

40,000

 

 

To 9% Debentures A/c

 

 

40,000

 

(Debenture allotment money due on 2,000 debentures at Rs 20 each)

 

 

 

 

 

 

 

 

 

Bank A/c

Dr.

 

36,000

 

 

To 9% Debentures Allotment A/c

 

 

36,000

 

(Debenture allotment money received)

 

 

 

 

 

 

 

 

 

Debenture First Call A/c

Dr.

 

60,000

 

 

To 9% Debentures A/c

 

 

60,000

 

(Debenture first call money due on 2,000 9% debenture at Rs 30 each)

 

 

 

 

 

 

 

 

 

Bank A/c

Dr.

 

60,000

 

 

To Debenture First Call A/c

 

 

60,000

 

(Debenture first call money received)

 

 

 

 

 

 

 

 

 

Debenture Final Call A/c

Dr.

 

60,000

 

 

To 9% Debentures A/c

 

 

60,000

 

(Debentures final call money due on 2,000 9% Debentures at Rs 30 each)

 

 

 

 

 

 

 

 

 

Bank A/c

Dr.

 

60,000

 

 

To Debenture Final Call A/c

 

 

60,000

 

(Debenture final call received on 2,000 9% Debenture at Rs 30 each)

 

 

 

 

 

 

 

 

 

Page No 9.51:

Question 3:

ABC Ltd. issued 40,000; 10% Debentures of ₹ 100 each at par for cash payable in full along with the application. Applications  were received for 60,000 debentures . Debentures were allotted and excess application money was refunded. Pass Journal entries in the books of the company.

Answer:

Journal

Date

ABCParticulars

L.F.

Debit

Amount

(Rs)

Credit

Amount

(Rs)

 

Bank A/c (60,000 ×100)

Dr.

 

60,00,000

 

 

  To Debenture Application and Allotment A/c

 

 

 

60,00,000

 

(Received application money on 60,000 Debenture)

 

 

 

 

 

 

 

 

 

 

 

Debenture Application and Allotment A/c

Dr.

 

60,00,000

 

 

  To 10% Debentures  A/c (40,000 ×100)

 

 

 

40,00,000

 

  To Bank A/c

 

 

 

20,00,000

 

(Application money transferred to Debentures A/c)

 

 

 

 

 

 

 

 

 

 

 



Page No 9.52:

Question 4:

Narain Laxmi Ltd. invited applications for issuing 7,500; 12% Debentures of ₹ 100 each at a premium of ₹ 35 per debenture . The full amount was payable on application. Applications were received for 10,000 Debentures. Allotment was made to all the applications on pro rata.
Pass necessary Journal entries for the above transactions in the books of Narain Laxmi Ltd.

Answer:

 

In the Books of Narain Laxmi Ltd.

Journal

 

Date

Particulars

L.F.

Debit

Amount

Rs

Credit Amount

Rs

 

Bank A/c (10,000 debentures × 135)

Dr.

 

13,50,000

 

 

To Debenture Application and Allotment A/c

 

 

 

13,50,000

 

(Application money received on 10,000 12% debenture)

 

 

 

 

 

 

 

 

 

Debenture Application and Allotment A/c

Dr.

 

13,50,000

 

 

To 12% Debentures A/c

 

 

 

7,50,000

 

To Securities Premium Reserve A/c

 

 

 

2,62,500

 

To Bank A/c

 

 

 

3,37,500

 

(7,500; 12% Debentures of Rs 100 each issued at a premium of Rs 35 and excess money refunded)

 

 

 

 

 

 

 

 

 

             

 

Page No 9.52:

Question 5:

Raj Ltd . issued 5,000;  8% Debentures of ₹ 100 each at a premium of 5% payable as follows:
₹ 10 on application ; ₹ 20 along with premium on allotment and balance on first and final call.
Pass necessary Journal entries.

Answer:

Books of Raj Ltd.

Journal

Date

Particulars

L.F.

Debit Amount

Rs

Credit Amount

Rs

 

Bank A/c

Dr.

 

50,000

 

 

To 8% Debenture Application A/c

 

 

50,000

 

(Debenture application money received for 5,000 debentures at Rs 10 each)

 

 

 

 

 

 

 

 

 

8% Debenture Application A/c

Dr.

 

50,000

 

 

To 8% Debentures A/c

 

 

50,000

 

(Debenture application money transferred to 8% Debentures A/c)

 

 

 

 

 

 

 

 

 

8% Debenture Allotment A/c

Dr.

 

1,00,000

 

 

To 8% Debentures A/c

 

 

75,000

 

To Securities Premium A/c

 

 

25,000

 

(Debenture allotment due on 5,000 8% Debentures at Rs 20 including premium of Rs 5)

 

 

 

 

 

 

 

 

 

Bank A/c

Dr.

 

1,00,000

 

 

To 8% Debentures Allotment A/c

 

 

1,00,000

 

(Debenture allotment money received)

 

 

 

 

 

 

 

 

 

8% Debentures First and Final Call A/c

Dr.

 

3,75,000

 

 

To 8% Debenture A/c

 

 

3,75,000

 

(Debenture first and final call due on 5,000 Debentures at Rs 75 each)

 

 

 

 

 

 

 

 

 

Bank A/c

Dr.

 

3,75,000

 

 

To 8% Debenture First and Final Call A/c

 

 

3,75,000

 

(Debenture first and final call received)

 

 

 

 

 

 

 

 

 

Page No 9.52:

Question 6:

Nipa Limited issued ₹ 10,00,000 Debentures of ₹ 100 each at a premium of 10% , payable 25% on application (including premium) and the balance on allotment . The debentures were applied for and the amount was dully received.
You are required to give Journal entries and prepare Cash Book.

Answer:

Face Value of Debenture = Rs 100

Premium (Rs 100 × 10%) = Rs 10

∴ Issue Price = Rs 110

Amount Payable as:

On Application (25%)

Rs 25 including premium of Rs 10 (i.e. Rs 10 + 15)

On Allotment (85%)

Rs 85 per debenture

 

Journal

Date

Particulars

L.F.

Debit Amount

Rs

Credit Amount

Rs

 

Debenture Application A/c

Dr.

 

2,50,000

 

 

To Debentures A/c

 

 

1,50,000

 

To Securities Premium A/c

 

 

1,00,000

 

(Debenture application money received for 10,000 debentures at Rs 25 including premium of Rs10 each transferred to debenture account)

 

 

 

 

 

 

 

 

 

Debenture Allotment A/c

Dr.

 

8,50,000

 

 

To Debentures A/c

 

 

8,50,000

 

(Debentures allotment due on 10,000 Debentures at Rs 85 each)

 

 

 

 

 

 

 

 

 

 

Cash Book

Dr.

 

Cr.

Date

Particulars

L.F.

Bank

Rs

Date

Particulars

L.F.

Bank

Rs

 

Debenture Application

 

2,50,000

 

 

 

 

 

Debenture Allotment

 

8,50,000

 

 

 

 

 

 

 

 

 

Balance c/d

 

11,00,000

 

 

 

11,00,000

 

 

 

11,00,000

 

 

 

 

 

 

 

 

 

Page No 9.52:

Question 7:

Alok Ltd. issued 7,000, 10% Debentures of ₹ 500 each at a premium of ₹ 50 per debenture redeemable at a premium of 10% after 5 years. According to the terms of issue, ₹ 200 was payable on application and balance on allotment.
Record necessary Journal entries at the time of issue of 10% Debentures.

Answer:

Journal

Date

Particulars

L.F.

Debit

Amount

(Rs)

Credit

Amount

(Rs)

 

Bank A/c (7,000×200)

Dr.

 

14,00,000

 

 

  To Debenture Application A/c

 

 

 

14,00,000

 

(Received application money on 7,000 debentures)

 

 

 

 

 

 

 

 

 

 

 

Debenture Application A/c

Dr.

 

14,00,000

 

 

  To 10% Debentures A/c

 

 

 

14,00,000

 

(Transfer of application money to Debentures A/c)

 

 

 

 

 

 

 

 

 

 

 

Debenture Allotment A/c (7,000×350)

Dr.

 

24,50,000

 

 

Loss on issue of Debentures A/c (7,000×50)

Dr.

 

3,50,000

 

 

  To 10% Debentures A/c (7,000×300)

 

 

 

21,00,000

 

  To Securities Premium Reserve A/c (7,000×50)

 

 

 

3,50,000

 

  To Premium on Redemption of Debentures A/c(7,000×50)

 

 

 

3,50,000

 

(Allotment due on 7,000 Debentures at a premium of Rs 50 per debentures and redeemable at premium of 10%)

 

 

 

 

 

 

 

 

 

 

 

Bank A/c

Dr.

 

   24,50,000

 

 

  To Debenture Allotment A/c

 

 

 

24,50,000

 

(Allotment money received)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Page No 9.52:

Question 8:

Vijay Laxmi Ltd. invited applications for 10,000; 12% Debentures of ₹ 100 each at a premium of ₹ 70 per debenture .The full amount was payable on application.
Applications were received for 13,500 debentures. Applications for 3,500 debentures were rejected  and application money was refunded . Debentures were allotted to the remaining applications .

Answer:

In the Books of Vijay Laxmi Ltd.

Journal

 

Date

Particulars

L.F.

Debit

Amount

Rs

Credit Amount

Rs

 

Bank A/c

Dr.

 

22,95,000

 

 

To Debenture Application and Allotment A/c

 

 

 

22,95,000

 

(Application money received on 13,500 12% debenture)

 

 

 

 

 

 

 

 

 

Debenture Application and Allotment A/c

Dr.

 

22,95,000

 

 

To 12% Debentures A/c

 

 

 

10,00,000

 

To Securities Premium Reserve A/c

 

 

 

7,00,000

 

To Bank A/c

 

 

 

5,95,000

 

(10,000; 12% Debentures issued at a premium of Rs 70 and excess money refunded)

 

 

 

 

 

 

 

 

             

 

Page No 9.52:

Question 9:

Iron Products Ltd. issued 5,000; 9% Debentures of ₹ 100 each at a premium of ₹ 40 payable as follows;
(i) ₹ 40 , including premium of ₹ 10 on applications;
(ii) ₹ 45, including premium of ₹ 15 on allotment ; and
(iii) Balance as first and final call.
The issue was subscribed and allotment made. Calls were made and due amount  was received .
Pass Journal entries .

Answer:

Journal

Date

Particulars

L.F.

Debit

Amount

(Rs)

Credit

Amount

(Rs)

 

Bank A/c (5,000×40)

Dr.

 

2,00,000

 

 

  To Debenture Application A/c

 

 

 

2,00,000

 

(Application money received)

 

 

 

 

 

 

 

 

 

 

 

Debenture Application A/c

Dr.

 

2,00,000

 

 

  To 9% Debentures A/c (5,000×30)

 

 

 

1,50,000

 

  To Security Premium Reserve A/c (5,000×10)

 

 

 

50,000

 

(Application money adjusted)

 

 

 

 

 

 

 

 

 

 

 

Debenture Allotment A/c (5,000×45)

Dr.

 

2,25,000

 

 

  To 9% Debentures A/c  (5,000×30)

 

 

 

1,50,000

 

  To Security Premium Reserve A/c (5,000×15)

 

 

 

75,000

 

(Allotment money due)

 

 

 

 

 

 

 

 

 

 

 

Bank A/c (5,000×45)

Dr.

 

2,25,000

 

 

   To Debenture Allotment A/c

 

 

 

2,25,000

 

(Allotment money received)

 

 

 

 

 

 

 

 

 

 

 

 Debenture First and Final call A/c (5,000×55)

Dr.

 

2,75,000

 

 

  To 9% Debentures A/c (5,000×40)

 

 

 

2,00,000

 

  To Security Premium Reserve A/c (5,000×15)

 

 

 

75,000

 

(First call money due)

 

 

 

 

 

 

 

 

 

 

 

Bank A/c

Dr.

 

2,75,000

 

 

  To Debenture Final and Final call A/c

 

 

 

2,75,000

 

(First Call money Received)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Page No 9.52:

Question 10:

X Ltd . issued 12,000; 8% Debentures of ​₹  100 each at a discount of 5% payable as 25% on application;20% on allotment and balance after three months.
Pass Journal entries.

Answer:

Face Value of Debenture = Rs 100

Discount (Rs 100 × 5%) = Rs 5

∴ Issue Price = Rs 95

Amount Payable as:

On Application (25%)

Rs 25 per debenture

On Allotment (20%)

Rs 20 (25 – 5) per debenture

On First and Final Call (50%)

Rs 50 per debenture

 

Journal

Date

Particulars

L.F.

Debit Amount

Rs

Credit Amount

Rs

 

Bank A/c

Dr.

 

3,00,000

 

 

To 8% Debenture Application A/c

 

 

3,00,000

 

(Application money received for 12,000 8% Debentures at Rs 25 each)

 

 

 

 

 

 

 

 

 

8% Debenture Application A/c

Dr.

 

3,00,000

 

 

To 8% Debentures A/c

 

 

3,00,000

 

(Debenture application money transferred to 8% Debentures account)

 

 

 

 

 

 

 

 

 

8% Debentures Allotment A/c

Dr.

 

2,40,000

 

 

Discount on Issue of Debentures A/c

Dr.

 

60,000

 

 

To 8% Debentures A/c

 

 

3,00,000

 

(Allotment money due on 12,000 8% Debentures at Rs 20 each at discount of Rs 5)

 

 

 

 

 

 

 

 

 

Bank A/c

Dr.

 

2,40,000

 

 

To 8% Debenture Allotment A/c

 

 

2,40,000

 

(Allotment money received)

 

 

 

 

 

 

 

 

 

8% Debenture First and Final Call A/c

Dr.

 

6,00,000

 

 

To 8% Debentures A/c

 

 

6,00,000

 

(First and final call money due on 12,000 8% Debentures at Rs 50 each)

 

 

 

 

 

 

 

 

 

Bank A/c

Dr.

 

6,00,000

 

 

To 8% Debentures First and Final Call A/c

 

 

6,00,000

 

(First and Final call money received)

 

 

 

 

 

 

 

 

 

Page No 9.52:

Question 11:

Alka Ltd . issued 5,000, 10% Debentures of ​₹  1,000 each at a discount of 10% redeemable at a premium of 5% after 5 years . According to the terms of issue ​₹  500 was payable  on application and the balance amount on allotment of debentures. Record necessary entries regarding issue of 10% Debentures.

Answer:

Journal

Date

Particulars

L.F.

Debit

Amount

(Rs)

Credit

Amount

(Rs)

 

Bank A/c (5,000×500)

Dr.

 

25,00,000

 

 

  To Debenture Application A/c

 

 

 

25,00,000

 

(Received application money on 5,000 debentures)

 

 

 

 

 

 

 

 

 

 

 

Debenture Application A/c

Dr.

 

25,00,000

 

 

  To 10% Debentures A/c

 

 

 

25,00,000

 

(Transfer of application money to Debentures A/c)

 

 

 

 

 

 

 

 

 

 

 

Debenture Allotment A/c (5,000×400)

Dr.

 

20,00,000

 

  Discount on issue of Debentures A/c (5,000×100)     5,00,000  

 

Loss on issue of Debentures A/c (5,000×50)

Dr.

 

2,50,000

 

 

  To 10% Debentures A/c (5,000×500)

 

 

 

25,00,000

 

  To Premium on Redemption of Debentures A/c (5,000×50)

 

 

 

2,50,000

 

(Allotment due on 5,000 Debentures at a discount of Rs 100 per debentures and redeemable at premium of 5%)

 

 

 

 

 

 

 

 

 

 

 

Bank A/c

Dr.

 

   20,00,000

 

 

  To Debenture Allotment A/c

 

 

 

20,00,000

 

(Allotment money received)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Page No 9.52:

Question 12:

Amrit Ltd . was promoted by Amrit and Bhaskar with an authorised capital of ​₹  10,00,000 divide into 1,00,000 shares of ​₹  10 each.
The company decided to issue 1,000,6% Debentures of ​₹  100 each to Amrit and Bhaskar  each for their services in incorporating the company.
Pass journal entry.

Answer:

Journal

Date

Particulars

L.F.

Debit

Amount

(Rs)

Credit

Amount

(Rs)

 

 

 

 

 

 

 

Incorporation Cost A/c (2,000 × 100)

Dr.

 

2,00,000

 

 

  To 6% Debentures A/c

 

 

 

2,00,000

 

( Debentures issued to promoters)

 

 

 

 

 

 

 

 

 

 

 



Page No 9.53:

Question 13:

Joy Ltd. company bought a Building for ​₹  9,00,000 and the consideration was paid by issuing 10% Debentures of the normal (face) value of ​₹ 100 each at a discount of 10%.

Give Journal entries.

Answer:

Books of Joy Limited
Journal

Date

Particulars

L.F.

Debit Amount

(₹)

Credit Amount

(₹)

 

Building A/c

Dr.

 

9,00,000

 

 

To Vendor A/c

 

 

9,00,000

 

(Building purchased)

 

 

 

 

 

 

 

 

 

Vendor A/c

Dr.

 

9,00,000

 

 

Discount on Issue of Debentures A/c

Dr.

 

1,00,000

 

 

To 10% Debentures A/c

 

 

10,00,000

 

(Issued 10,000, 10% debentures at 10% discount)

 

 

 

 

 

 

 

 

Working Note:

Page No 9.53:

Question 14:

Wye Ltd . purchased an established business for ​₹  2,00,000 payable as ​₹  65,000 by cheque and the balance by issuing 9% Debentures of ​₹  100 each at a discount of 10%.
Give journal entries  in the books of Wye Ltd.

Answer:

Books of Wye Ltd.   

Journal

Date

Particulars

L.F.

Debit Amount

Rs

Credit Amount

Rs

 

Sundry Assets A/c

Dr.

 

2,00,000

 

 

To Vendor A/c

 

 

2,00,000

 

(Business purchased)

 

 

 

 

 

 

 

 

 

Vendor A/c

Dr.

 

65,000

 

 

To Bank A/c

 

 

65,000

 

(Amount paid to Vendor in cash)

 

 

 

 

 

 

 

 

 

Vendor A/c

Dr.

 

1,35,000

 

 

Discount on Issue of Debentures A/c

Dr.

 

15,000

 

 

To 9% Debentures A/c

 

 

1,50,000

 

(Issued 1,500 debentures at 10% discount)

 

 

 

 

 

 

 

 

Working Note:

Page No 9.53:

Question 15:

Newton Ltd. purchased a Machinery from B for ​₹  5,76,000 to be paid by the issue of 9% Debentures of ​₹  100 each at 4% discount. Journalise the trasactions.

Answer:

Books of Newton Ltd.

Journal

Date

Particulars

L.F.

Debit Amount

Rs

Credit Amount

Rs

 

Machinery A/c

Dr.

 

5,76,000

 

 

To B

 

 

5,76,000

 

(Machinery purchased from B)

 

 

 

 

 

 

 

 

 

B

Dr.

 

5,76,000

 

 

Discount on Issue of Debenture A/c

Dr.

 

24,000

 

 

To 9% Debenture A/c

 

 

6,00,000

 

(Issued 6,000 debentures at 4% discount)

 

 

 

 

 

 

 

 

Working Note:

Page No 9.53:

Question 16:

Reliance Ltd. purchased machinery costing ​₹  1,35,000 . It was agreed that the purchase consideration be paid by issuing 9% Debentures of ​₹  100 each . Assume debentures have been issued
(i) at par and
(ii)at a discount of 10%.
Give necessary journal entries.

Answer:

Case 1

Books of Reliance Ltd.

Journal

Date

Particulars

L.F.

Debit Amount

Rs

Credit Amount

Rs

 

Machinery A/c

Dr.

 

1,35,000

 

 

To Vendor A/c

 

 

1,35,000

 

(Machinery Purchases)

 

 

 

 

 

 

 

 

 

Vendor A/c

Dr.

 

1,35,000

 

 

To 9% Debenture A/c

 

 

1,35,000

 

(Issued 1,350 debentures at par)

 

 

 

 

 

 

 

 

Working Note:

Case 2

Journal

Date

Particulars

L.F.

Debit Amount

Rs

Credit Amount

Rs

 

Machinery A/c

Dr.

 

1,35,000

 

 

To Vendor A/c

 

 

1,35,000

 

(Machinery purchased)

 

 

 

 

 

 

 

 

 

Vendor A/c

Dr.

 

1,35,000

 

 

Discount on Issue of Debentures A/c

Dr.

 

15,000

 

 

To 9% Debenture A/c

 

 

1,50,000

 

(Issued 1,500 debentures at 10% discount)

 

 

 

 

 

 

 

 

Working Note:

Page No 9.53:

Question 17:

Deepak Ltd purchased furniture of ₹ 2,20,000 from M/s. Furniture Mart. 50% of the amount was paid to M/s. Furniture Mart by accepting a Bill of Exchanged and for the balance the company issued 9% Debenture of ​₹  100 each at a premium of 10% in favour of M/s. Furniture Mart.
Pass Journal entries in the books of Deepak Ltd. 

Answer:

Books of Deepak Ltd.

Journal

Date

Particulars

L.F.

Debit Amount

Rs

Credit Amount

Rs

 

Furniture A/c

Dr.

 

2,20,000

 

 

To Furniture Mart

 

 

2,20,000

 

(Furniture purchased from Furniture Mart)

 

 

 

 

 

 

 

 

 

Furniture Mart

Dr.

 

1,10,000

 

 

To Bills Payable A/c

 

 

1,10,000

 

(Bill accepted from Furniture Mart against 50% payment)

 

 

 

 

 

 

 

 

 

Furniture Mart

Dr.

 

1,10,000

 

 

To 9% Debenture A/c

 

 

1,00,000

 

To Securities Premium A/c

 

 

10,000

 

(Issued 1,000 9% Debentures of Rs 100 each at a premium of 10% to Furniture Mart)

 

 

 

 

 

 

 

 

Working Note:

Page No 9.53:

Question 18:

Bright Ltd. took over the assets of ₹ 6,60,000 and liabilities of ₹ 80,000 of Star Ltd. for an agreed purchase consideration of ₹ 6,00,000 payable 10% in cash and the balance by the issue of 12% Debentures of ₹ 100 each. Give necessary Journal entries in the books of Bright Ltd., assuming that:
Case (a): The debentures are issued at par.
Case (b): The debentures are issued at 20% premium.
Case (c): The debentures are issued at 10% discount.

Answer:

Books of Bright Ltd.
Journal

Date

Particulars

L.F.

Debit

Amount

(₹)

Credit

Amount

(₹)

 

Assets A/c

Dr.

 

6,60,000

 

 

Goodwill A/c(Balancing Figure)

Dr.

 

20,000

 

 

     To Liabilities A/c

 

 

 

80,000

 

     To Star Ltd.

 

 

 

6,00,000

 

(Purchase of business of Star Ltd.)

 

 

 

 

 

 

 

 

60,000

 

 

Star Ltd.

Dr.

 

 

60,000

 

  To Cash A/c

 

 

 

 

 

(Payment made in cash)

 

 

 

 

 

 

 

 

 

 

(a)

Star Ltd.

Dr.

 

5,40,000

 

 

  To 12% Debentures A/c 

 

 

 

5,40,000

 

( Purchase consideration discharged by issue of 12% Debentures)

 

 

 

 

 

 

 

 

 

 

(b)

Star Ltd.

Dr.

 

5,40,000

 

 

  To 12% Debentures A/c 

 

 

 

4,50,000

 

  To Security Premium Reserve A/c

 

 

 

90,000

 

( Purchase consideration discharged by issue of 12% Debentures)

 

 

 

 

 

 

 

 

 

 

(c)

Star Ltd.

Dr.

 

5,40,000

 

 

Discount on Issue of Debentures A/c

Dr.

 

60,000

 

 

  To 12% Debentures A/c 

 

 

 

6,00,000

 

( Purchase consideration discharged by issue of 12% Debentures)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Working Note:

1) Number of Debentures to issued=5,40,000120=4,500 Debentures
2) Number of Debentures to issued=5,40,00090=6,000 Debentures

Page No 9.53:

Question 19:

Star Ltd. took over the assets of ₹ 6,60,000 and liabilities of ₹ 80,000 of Moon Ltd. for ₹ 6,00,000. Give necessary Journal entries in the books of Star Ltd. assuming that:
Case (a): The purchase consideration was payable 10% in cash and the balance in 5,400; 12% Debentures of ₹ 100 each.
Case (b): The purchase consideration was payable 10% in cash and the balance in 4,500; 12% Debentures of ₹ 100 each issued at 20% premium.

Answer:

Journal

Date

Particulars

L.F.

Debit

Amount

(₹)

Credit

Amount

(₹)

 

Assets A/c

Dr.

 

6,60,000

 

 

Goodwill A/c (Balancing Figure)

Dr.

 

20,000

 

 

     To Liabilities A/c

 

 

 

80,000

 

     To Moon Ltd.

 

 

 

6,00,000

 

(Purchase of business took over)

 

 

 

 

 

 

 

 

 

 

a.

Moon Ltd.

Dr.

 

6,00,000

 

 

  To Cash A/c

 

 

 

60,000

 

  To 12% Debentures A/c 

 

 

 

5,40,000

 

(Purchase consideration discharged)

 

 

 

 

 

 

 

 

 

 

b.

Moon Ltd.

Dr.

 

6,00,000

 

 

  To Cash A/c

 

 

 

60,000

 

  To 12% Debentures A/c 

 

 

 

4,50,000

 

  To Security Premium Reserve A/c

 

 

 

90,000

 

( Purchase consideration discharged)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



Page No 9.54:

Question 20:

Romi Ltd. acquired assets of  ₹ 20 lakhs and took over creditors of  ₹ 2 lakhs from Kapil Enterprises.
Romi Ltd. issued 8% Debentures  of  ₹ 100 each at a discount of 25% as purchase consideration.
Record necessary journal entries in the books of Romi Ltd.

Answer:

Books of Romi Ltd.

Journal

Date

Particular

L.F.

Debit Amount

Rs

Credit Amount

Rs

 

Assets A/c

Dr.

 

20,00,000

 

 

To Creditors A/c

 

 

2,00,000

 

To Kapil Enterprises

 

 

18,00,000

 

(Asset purchased and Creditors took over from Kapil Enterprises)

 

 

 

 

 

 

 

 

 

Kapil Enterprises A/c

Dr.

 

18,00,000

 

 

To 8% Debentures A/c

 

 

14,40,000

 

To Securities Premium A/c

 

 

3,60,000

 

(Issued 14,400 8% Debentures of Rs 100 each at a premium of 25% to Kapil Enterprises)

 

 

 

 

 

 

 

 

Working Note:

Page No 9.54:

Question 21:

Romi Ltd. acquired assets of  ₹ 20 lakhs and took over creditors of  ₹ 2 lakhs from Kapil Enterprises.
Romi Ltd. issued 8% Debentures  of  ₹ 100 each at a discount of 10% as purchase consideration.
Record necessary journal entries in the books of Romi Ltd.

Answer:

Books of Romi Ltd.

Journal

Date

Particulars

L.F.

Debit Amount

Rs

Credit Amount

Rs

 

Assets A/c

Dr.

 

20,00,000

 

 

To Creditors A/c

 

 

2,00,000

 

To Kapil Enterprises

 

 

18,00,000

 

(Assets purchased and Creditors took over from Kapil Enterprises)

 

 

 

 

 

 

 

 

 

Kapil Enterprises

Dr.

 

18,00,000

 

 

Discount on Issue of Debentures A/c

Dr.

 

2,00,000

 

 

To 8% Debentures A/c

 

 

20,00,000

 

(Issued 20,000 8% Debentures of Rs 100 each at discount of 10% to Kapil Enterprises)

 

 

 

 

 

 

 

 

Working Note:

Page No 9.54:

Question 22:

Exe Ltd. purchased the assets of the book value  ₹4,00,000 and took over the liabilities of ₹ 50,000 from Mohan Bros.It was agreed that the  purchase consideration ,settled at  ₹3,80,000 be paid by issuing debentures  of ₹ 100 each.
Pass journal entries if debenture are issued: 
(a) at par
(b) at a discount of 10% and
(c) at a premium of 10%.
It was agreed that any fraction of debentures be paid in cash.

Answer:

Journal

Date

Particulars

L.F.

Debit

Amount

Rs

Credit Amount

Rs

 

Assets A/c

Dr.

 

4,00,000

 

 

Goodwill A/c (balancing figure)

Dr.

 

30,000

 

 

To Liabilities A/c

 

 

50,000

 

To Mohan Bros. A/c

 

 

3,80,000

 

(Asset and liabilities purchased from Mohan Bros.)

 

 

 

 

 

 

 

 

 

Case 1 When Debentures are issued at Par

Journal

Date

Particulars

L.F.

Debit Amount

Rs

Credit Amount

Rs

 

Mohan Bros.

Dr.

 

3,80,000

 

 

To Debenture A/c

 

 

3,80,000

 

(Issued 3,800 debentures at par)

 

 

 

 

 

 

 

 

Working Note:

Case 2 When Debentures are issued at 10% discount

Journal

Date

Particulars

L.F.

Debit Amount

Rs

Credit Amount

Rs

 

Mohan Bros.

Dr.

 

3,80,000

 

 

Discount on issue of Debenture A/c

Dr.

 

42,220

 

 

To Debenture A/c

 

 

4,22,200

 

To Bank A/c

 

 

20

 

(Issued 4,222 Debentures of Rs 100 each at 10% discount to Mohan Bros. and fraction of debentures is paid in cash)

 

 

 

 

 

 

 

 

 

Working Note:

 

Case 3 When Debentures are issued at 10% premium

 

Journal

Date

Particulars

L.F.

Debit Amount

Rs

Credit Amount

Rs

 

Mohan Bros.

Dr.

 

3,80,000

 

 

To Debenture A/c

 

 

3,45,400

 

To Securities Premium A/c

 

 

34,540

 

To Bank A/c

 

 

60

 

(Issued 3,454 Debentures of Rs 100 each at 10% premium to Mohan Bros. and fraction of debentures is paid in cash)

 

 

 

 

 

 

 

 

Working Note:

Page No 9.54:

Question 23:

R Ltd. purchased the assets of S Ltd. for ₹5,00,000. It also agreed to take over the liabilities of S Ltd. amounted to ₹ 2,00,000 for a purchase consideration of ₹2,80,000 . The payment of S Ltd. was made by issue of 9% Debentures of ₹ 100 each at par.
Pass necessary journal entries in the books of R Ltd.

Answer:

Books of R Ltd.

Journal

Date

Particulars

L.F.

Debit Amount

Rs

Credit Amount

Rs

 

Assets A/c

Dr.

 

5,00,000

 

 

To Liabilities A/c

 

 

2,00,000

 

To S Ltd.

 

 

2,80,000

 

To Capital Reserve A/c (balancing figure)

 

 

20,000

 

(Asset purchased and liabilities took over from S Ltd.)

 

 

 

 

 

 

 

 

 

S Ltd.

Dr.

 

2,80,000

 

 

To 9% Debentures A/c

 

 

2,80,000

 

(Issued 2,800 9% Debentures of Rs 100 each)

 

 

 

 

 

 

 

 

Working Note:

Page No 9.54:

Question 24:

Green Ltd. purchased the assets of Strong Ltd. for ₹ 40,00,000 and took over liabilities of 7,00,000 at an agreed value of ₹ 32,40,000. Payment was made by issuing 10% Debentures of 100 each at a discount of 10%. Pass the necessary Journal entries in the books of Green Ltd.

Answer:

In the books of Green Ltd.

Journal

Date

Particulars

 

L.F.

Debit
Amount
(₹)

Credit
Amount
(₹)

 

Sundry Assets A/c

Dr.

 

40,00,000

 

 

  To Sundry Liabilities A/c

 

 

 

7,00,000

 

  To Strong Ltd.

 

 

 

32,40,000

 

  To Capital Reserve A/c

 

 

 

60,000

 

(Being the purchase of business of Strong Ltd.)

 

 

 

 

 

 

 

 

 

 

 

Strong Ltd. A/c

Dr.

 

32,40,000

 

 

Discount on Issue of Debentures A/c (36,000×10)

Dr.

 

3,60,000

 

 

  To 10% Debentures A/c

 

 

 

36,00,000

 

(Being 36,000, 10% debentures issued as purchase consideration)

 

 

 

 

Working Notes:
Number of Debentures issued= (32,40,000/90) = 36,000 debentures

Page No 9.54:

Question 25:

Wellbeing Ltd. took over assets of ₹ 9,80,000 and liabilities of ₹ 40,000 of HDR Ltd. at an agreed value of ₹ 9,00,000. Wellbeing Ltd. paid to HDR Ltd. by issue of 9% Debentures of ₹ 100 each at a premium of 20%. Pass necessary Journal entries to record the above transactions in the books of Wellbeing Ltd.

Answer:

In the books of Wellbeing Ltd.

Journal

Date

Particulars

 

L.F.

Debit
Amount
(₹)

Credit
Amount
(₹)

 

Sundry Assets A/c

Dr.

 

9,80,000

 

 

  To Sundry Liabilities A/c

 

 

 

40,000

 

  To HDR Ltd.

 

 

 

9,00,000

 

  To Capital Reserve A/c

 

 

 

40,000

 

(Being the purchase of business of HDR Ltd.)

 

 

 

 

 

 

 

 

 

 

 

HDR Ltd. A/c

Dr.

 

9,00,000

 

 

  To 9% Debentures A/c (7,500 × 100)

 

 

 

7,50,000

 

  To Securities Premium Reserve A/c (7,500 × 20)

 

 

 

1,50,000

 

(Being 36,000, 10% debentures issued as purchase consideration)

 

 

 

 

Working Notes:
Number of Debentures issued = (9,00,000/120) = 7,500 debentures

Page No 9.54:

Question 26:

Grown Ltd. issued 500, 10% Debentures of ₹ 1,000 each credited as fully paid-up to the promoters for their services to incorporate the company. It also issued 100, 10% Debentures of ₹ 1,000 each credited as fully paid-up to the underwriters towards their commission. Pass the Journal entries.

Answer:

In the books of Grown Ltd.

Journal

Date

Particulars

 

L.F.

Debit
Amount (₹)

Credit
Amount (₹)

 

Incorporation Expenses A/c

Dr.

 

5,00,000

 

 

  To Promoters A/c

 

 

 

5,00,000

 

(Being amount due to promoters for their services)

 

 

 

 

 

 

 

 

 

 

 

Promoters A/c

Dr.

 

5,00,000

 

 

  To 10% Debentures A/c (500 × 1,000)

 

 

 

5,00,000

 

(Being 500, 10% debentures issued as purchase consideration)

 

 

 

 

 

 

 

 

 

 

 

Underwriting Commission A/c

Dr.

 

1,00,000

 

 

  To Underwriters A/c

 

 

 

1,00,000

 

(Being amount due to underwriters for their services)

 

 

 

 

 

 

 

 

 

 

 

Underwriters A/c

Dr.

 

1,00,000

 

 

  To 10% Debentures A/c (100 × 1,000)

 

 

 

1,00,000

 

(Being 100, 10%  debentures issued as purchase consideration)

 

 

 

 

 

 

 

 

 

 

 

Statement of Profit and Loss A/c

Dr.

 

6,00,000

 

 

  To Incorporation Expenses A/c

 

 

 

5,00,000

 

  To Underwriting Commission A/c

 

 

 

1,00,000

 

(Being expenses transferred to statement of profit and loss at the end of year)

 

 

 

 

 

 

 

 

 

 



Page No 9.55:

Question 27:

'Sangam Woollens Ltd.', Ludhiana, are the manufacturers and exporters of woollen garments. The company decided to distribute free of cost woollen garments to 10 villages of Lahaul and Spiti District of Himachal Pradesh. The company also decided to employ 50 young persons from these villages in its newly established factory. The company issued 40,000 Equity Shares of ₹ 10 each and 1,000, 9% Debentures of ₹ 100 each to the vendor for the purchase of machinery of ₹ 5,00,000. Pass necessary Journal entries.

Answer:

In the books of Sangam Woollens Ltd.

Journal

Date

Particulars

 

L.F.

Debit
Amount
(₹)

Credit
Amount
(₹)

 

Machinery A/c

Dr.

 

5,00,000

 

 

  To Vendor A/c

 

 

 

5,00,000

 

(Being machinery purchased from a Vendor)

 

 

 

 

 

 

 

 

 

 

 

Vendor A/c

Dr.

 

5,00,000

 

 

  To Equity Share Capital A/c (40,000×10)

 

 

 

4,00,000

 

  To 9% Debentures A/c (1,000×100)

 

 

 

1,00,000

 

(Being equity shares and 9% Debentures issued as purchase consideration)

 

 

 

 

 

 

 

 

 

 

Page No 9.55:

Question 28:

Best Barcode Ltd. took a loan of  ₹ 5,00,000 from a bank giving  ₹ 6,00,000; 9% Debentures as collateral security. Pass journal entries regarding issue of debentures , if any, and show this loan in the Balance Sheet of the company.

Answer:

Best Barcode Ltd.

Balance Sheet

Particulars

Note No.

Amount 

(Rs)

I. Equity and Liabilities

 

 

1. Shareholders’ Funds

 

 

2. Non-Current Liabilities

 

 

a. Long-Term Borrowings

1

5,00,000

3. Current Liabilities

 

 

Total

 

5,00,000

 

 

 

II. Assets

 

 

1. Non-Current Assets

 

 

2. Current Assets

 

 

a. Cash and Cash Equivalents

2

5,00,000

Total

 

5,00,000

 

 

 

NOTES TO ACCOUNTS

Note No.

Particulars

Amount

(Rs)

 

 

 

1

Long-Term Borrowings

 

 

Loan (Secured by issue of  9% Debentures of Rs 6,00,000 as Collateral Security)

 

5,00,000

 

 

 

2

Cash and Cash Equivalents

 

 

Cash at Bank

5,00,000

 

 

 

 

Date

Particulars

L.F.

Debit Amount

Rs

Credit Amount

Rs

 

Bank A/c

Dr.

 

5,00,000

 

 

To Loan A/c

 

 

5,00,000

 

(Loan taken against issuing 9% Debentures as collateral Security)

 

 

 

 

 

 

 

 

Alternative Method:  

Date

Particulars

L.F.

Debit Amount

Rs

Credit Amount

Rs

 

Bank A/c

Dr.

 

5,00,000

 

 

To Loan A/c

 

 

5,00,000

 

(Loan taken against issuing 9% debentures as collateral Security)

 

 

 

 

 

 

 

 

 

Debenture Suspense A/c

Dr.

 

6,00,000

 

 

To 9% Debentures A/c

 

 

6,00,000

 

(Issued 9% Debentures of Rs 6,00,000 as collateral security)

 

 

 

 

 

 

 

 

Posting in the Company's Balance Sheet

Best Barcode Ltd.

Balance Sheet

Particulars

Note No.

Amount 

(Rs)

I. Equity and Liabilities

 

 

1. Shareholders’ Funds

 

 

2. Non-Current Liabilities

 

 

a. Long-Term Borrowings

1

5,00,000

3. Current Liabilities

 

 

Total

 

5,00,000

 

 

 

II. Assets

 

 

1. Non-Current Assets

 

 

2. Current Assets

 

 

a. Cash and Cash Equivalents

2

5,00,000

Total

 

5,00,000

 

 

 

NOTES TO ACCOUNTS

Note No.

Particulars

Amount

(Rs)

 

 

 

1

Long-Term Borrowings

 

 

Secured:

 

 

Loan (Secured by issue of  9% Debentures of

Rs 6,00,000 as Collateral Security)

 

5,00,000

 

9% Debentures (Issued as Collateral Security to Bank against loan)

 

6,00,000

 

 

 

Less: Debenture Suspense Account

6,00,000

-

 

 

5,00,000

 

 

 

2

Cash and Cash Equivalents

 

 

Cash at Bank

5,00,000

 

 

 

 

Page No 9.55:

Question 29:

A company took a loan of  ₹ 4,00,000 from Bandhan Bank Ltd. and issued  8% Debentures of  ₹ 4,00,000 as a collateral security.

Answer:

When Debentures Issued as Collateral Security are shown separately

Date

Particulars

L.F.

Debit Amount

Rs

Credit Amount

Rs

 

Bank A/c

Dr.

 

4,00,000

 

 

To Loan from Bandhan Bank Ltd.

 

 

4,00,000

 

(Loan taken against issuing 8% Debentures as collateral security)

 

 

 

 

 

 

 

 

 

Debenture Suspense A/c

Dr.

 

4,00,000

 

 

To 8% Debenture A/c

 

 

4,00,000

 

(Debentures issued as collateral security)

 

 

 

 

 

 

 

 

Posting in the Company's Balance Sheet (When Debentures Issued as Collateral Security are shown separately)

Balance Sheet

Particulars

Note No.

Amount 

(Rs)

I Equity and Liabilities

 

 

1.Shareholders’ Funds

 

 

2.Non-Current Liabilities

 

 

a. Long-Term Borrowings

1

4,00,000

3.Current Liabilities

 

 

Total

 

4,00,000

 

 

 

II Assets

 

 

1. Non-Current Assets

 

 

2. Current Assets

 

 

a. Cash and Cash Equivalents

2

4,00,000

Total

 

4,00,000

 

 

 

NOTES TO ACCOUNTS

Note No.

Particulars

Amount

(Rs)

 

 

 

1

Long-Term Borrowings

 

 

Secured:

 

 

Loan from Bandhan Bank (Secured by issue of  Debentures of Rs 4,00,000)

4,00,000

 

8% Debentures (Issued as Collateral Security to Bank against Loan)

 

4,00,000

 

 

 

Less: Debenture Suspense Account

4,00,000

-

 

 

4,00,000

 

 

 

2

Cash and Cash Equivalents

 

 

Cash at Bank

4,00,000

 

 

 

Alternative Method: When debentures Issued as Collateral Security are not shown separately

 

Date

Particulars

L.F.

Debit Amount

Rs

Credit Amount

Rs

 

Bank A/c

Dr.

 

4,00,000

 

 

To Loan From Bandhan Bank Ltd.

 

 

4,00,000

 

(Loan taken from Bandhan Bank secured by issuing Debentures as collateral security)

 

 

 

 

 

 

 

 

(When Debentures Issued as Collateral Security are not shown separately)

Balance Sheet

Particulars

Note No.

Amount 

(Rs)

I. Equity and Liabilities

 

 

1. Shareholders’ Funds

 

 

2. Non-Current Liabilities

 

 

a. Long-Term Borrowings

1

4,00,000

3. Current Liabilities

 

 

Total

 

4,00,000

 

 

 

II. Assets

 

 

1. Non-Current Assets

 

 

2. Current Assets

 

 

a. Cash and Cash Equivalents

2

4,00,000

Total

 

4,00,000

 

 

 

NOTES TO ACCOUNTS

Note No.

Particulars

Amount

(Rs)

 

 

 

1

Long-Term Borrowings

 

 

Secured:

 

 

Loan from Bandhan Bank (Secured by issue of  8% Debentures of Rs 4,00,000 as Collateral Security)

 

4,00,000

 

 

 

2

Cash and Cash Equivalents

 

 

Cash at Bank

4,00,000

 

 

 

 

Page No 9.55:

Question 30:

X Ltd. took a loan of  ₹ 3,00,000 from IDBI Bank . The company issued 4,000; 9% Debentures of  ₹ 100 each as a collateral security for the same . Show how these items will be presented in the Balance Sheet of the company.

Answer:

When Debentures Issued as Collateral Security is shown separately

X Ltd.

Balance Sheet

Particulars

Note No.

Amount 

(Rs)

I. Equity and Liabilities

 

 

1. Shareholders’ Funds

 

 

2. Non-Current Liabilities

 

 

a. Long-Term Borrowings

1

3,00,000

3. Current Liabilities

 

 

Total

 

3,00,000

 

 

 

II. Assets

 

 

1.Non-Current Assets

 

 

2.Current Assets

 

 

a. Cash and Cash Equivalents

2

3,00,000

Total

 

3,00,000

 

 

 

NOTES TO ACCOUNTS

Note No.

Particulars

Amount

(Rs)

 

 

 

1

Long-Term Borrowings

 

 

Secured:

 

 

Loan  From IDBI(Secured by issue of  Debentures of Rs 4,00,000)

3,00,000

 

9 % Debentures (Issued as Collateral Security against loan)

 

4,00,000

 

 

 

Less: Debenture Suspense Account

4,00,000

-

 

 

3,00,000

 

 

 

2

Cash and Cash Equivalents

 

 

Cash at Bank

3,00,000

 

 

 

Alternative Method: When Debentures Issued as Collateral Security are not shown separately

X Ltd.

Balance Sheet

Particulars

Note No.

Amount 

(Rs)

I. Equity and Liabilities

 

 

1. Shareholders’ Funds

 

 

2. Non-Current Liabilities

 

 

a. Long-Term Borrowings

1

3,00,000

3.Current Liabilities

 

 

Total

 

3,00,000

 

 

 

II. Assets

 

 

1. Non-Current Assets

 

 

2. Current Assets

 

 

a. Cash and Cash Equivalents

2

3,00,000

Total

 

3,00,000

 

 

 

NOTES TO ACCOUNTS

Note No.

Particulars

Amount

(Rs)

 

 

 

1

Long-Term Borrowings

 

 

Secured:

 

 

Loan From IDBI (Secured by issue of  9% Debentures of Rs 4,00,000 as Collateral Security)

 

3,00,000

 

 

 

2

Cash and Cash Equivalents

 

 

Cash at Bank

3,00,000

 

 

 

 

Page No 9.55:

Question 31:

S. Singh Limited obtained a loan of ₹ 5,00,000 from State Bank of India @ 10% p.a. interest. The company issued ₹ 7,50,000, 10% Debentures of ₹ 100 each in favour of State Bank of India as Collateral Security. Pass necessary Journal entries for the above transactions:
(i) When company decided not to record the issue of 10% Debentures as Collateral Security.
(ii) When company decided to record the issue of 10% Debentures as Collateral Security.

Answer:

(i) When company decided not to record the issue of 10% debentures as Collateral Security

In the books of S. Singh Ltd.

Journal

Date

Particulars

 

L.F.

Debit
Amount
(₹)

Credit
Amount
(₹)

 

Bank A/c

Dr.

 

5,00,000

 

 

  To Bank Loan A/c

 

 

 

5,00,000

 

(Being bank loan taken from State Bank of India @10% p.a. interest)

 

 

 

 

(ii) When company decided to record the issue of 10% debentures as Collateral Security

In the books of S. Singh Ltd.

Journal

Date

Particulars

 

L.F.

Debit Amount (₹)

Credit Amount (₹)

 

Bank A/c

Dr.

 

5,00,000

 

 

  To Bank Loan A/c

 

 

 

5,00,000

 

(Being bank loan taken from State Bank of India @10% p.a. interest)

 

 

 

 

 

 

 

 

 

 

 

Debentures Suspense A/c

Dr.

 

7,50,000

 

 

  To 10% Debentures A/c

 

 

 

7,50,000

 

(Being 7,500, 10% Debentures issued as collateral security)

 

 

 

 

Page No 9.55:

Question 32:

Journalise the following:
(a) A debenture issued at ₹95, repayable at ₹ 100.
(b) A debenture issued at ₹95, repayable at ₹ 105.
(c) A debenture issued at ₹95, repayable at ₹ 105.
The face value of debenture is  ₹ 100 in each of the above cases.

Answer:

Journal

Date

Particulars

L.F.

Debit 

Amount

Rs

Credit Amount

Rs

(a)

Bank A/c

Dr.

 

95

 

 

To Debenture Application A/c

 

 

95

 

(Debenture application money received)

 

 

 

 

 

 

 

 

 

Debenture Application A/c

Dr.

 

95

 

 

Discount on Issue of Debentures A/c

 

 

5

 

 

To Debenture A/c

 

 

100

 

(Debenture of Rs 100 each issued at Rs 95 with the term repayable at par)

 

 

 

 

 

 

 

 

(b)

Bank A/c

Dr.

 

95

 

 

To Debenture Application A/c

 

 

95

 

(Debenture application money received)

 

 

 

 

 

 

 

 

 

Debenture Application A/c

Dr.

 

95

 

 

Discount on Issue of Debentures A/c

Dr.

 

5

 

 

Loss on Issue of Debentures A/c

Dr.

 

5

 

 

To Debentures A/c

 

 

100

 

To Premium on Redemption A/c

 

 

5

 

(Debenture of Rs 100 each issued of Rs 95 with the term repayable at Rs 105)

 

 

 

 

 

 

 

 

(c)

Bank A/c

Dr.

 

100

 

 

To Debenture Application A/c

 

 

100

 

(Debenture Application received)

 

 

 

 

 

 

 

 

 

Debenture Application A/c

Dr.

 

100

 

 

Loss on Issue of Debentures A/c

Dr.

 

5

 

 

To Debentures A/c

 

 

100

 

To Premium on Redemption A/c

 

 

5

 

(Debenture of Rs 100 each issued at par with the term repayable at Rs 105)

 

 

 

 

 

 

 

 

 

Page No 9.55:

Question 33:

Pass journal entries in the following cases:
(a) A Co.Ltd. issued ₹40,000; 12% Debentures at a premium of 5% redeemable at par.
(b) A Co.Ltd. issued ₹40,000; 12% Debentures at a discount of 10% redeemable at par.
(c) A Co.Ltd. issued ₹40,000; 12% Debentures at par redeemable at 10% premium.
(d) A Co.Ltd. issued ₹40,000; 12% Debentures at a discount of 5%  and redeemable at 5% premium.
(e) A Co.Ltd. issued ₹40,000; 12% Debentures at a premium of 10% redeemable at 110%.

Answer:

Journal

Date

Particulars

L.F.

Debit Amount

Rs

Credit Amount

Rs

(a)

Bank A/c

Dr.

 

42,000

 

 

To 12% Debenture Application A/c

 

 

42,000

 

(Debenture application money received)

 

 

 

 

 

 

 

 

 

12% Debenture Application A/c

Dr.

 

42,000

 

 

To 12% Debentures A/c

 

 

40,000

 

To Securities Premium A/c

 

 

2,000

 

(Debenture application money transferred to 12% Debentures account and securities premium account)

 

 

 

 

 

 

 

 

 

Journal

Date

Particulars

L.F.

Debit Amount

Rs

Credit Amount

Rs

(b)

Bank A/c

Dr.

 

36,000

 

 

To 12% Debenture Application A/c

 

 

36,000

 

(Debenture application money received)

 

 

 

 

 

 

 

 

 

12% Debenture Application A/c

Dr.

 

36,000

 

 

Discount on Issue of Debentures A/c

Dr.

 

4,000

 

 

To 12% Debentures A/c

 

 

40,000

 

(Debentures of Rs 40,000 issued at 10% discount)

 

 

 

 

 

 

 

 

 

 

Journal

Date

Particulars

L.F.

Debit Amount

Rs

Credit Amount

Rs

(c)

Bank A/c

Dr.

 

40,000

 

 

To 12% Debenture Application A/c

 

 

40,000

 

(Debenture application money received)

 

 

 

 

 

 

 

 

 

12% Debenture Application A/c

Dr.

 

40,000

 

 

Loss on Issue of Debentures A/c

Dr.

 

4,000

 

 

To 12% Debentures A/c

 

 

40,000

 

To Premium on Redemption A/c

 

 

4,000

 

(Debentures of Rs 40,000 issued at par with the term repayable at 10% premium)

 

 

 

 

 

 

 

 

 

Journal

Date

Particulars

L.F.

Debit Amount

Rs

Credit Amount

Rs

(d)

Bank A/c

Dr.

 

38,000

 

 

To 12% Debenture Application A/c

 

 

38,000

 

(Debenture application money received)

 

 

 

 

 

 

 

 

 

Debenture Application A/c

Dr.

 

38,000

 

 

Discount on Issue of Debenture A/c

Dr.

 

2,000

 

 

Loss on Issue of Debenture A/c

Dr.

 

2,000

 

 

To 12% Debentures A/c

 

 

40,000

 

To Premium on Redemption A/c

 

 

2,000

 

(Debentures of Rs 40,000 issued at 5% discount with the term repayable at 5% premium)

 

 

 

 

 

 

 

 


Journal

Date

Particulars

L.F.

Debit Amount

Rs

Credit Amount

Rs

(e)

Bank A/c

Dr.

 

44,000

 

 

To 12% Debenture Application A/c

 

 

44,000

 

(Debenture application money received)

 

 

 

 

 

 

 

 

 

12% Debenture Application A/c

Dr.

 

44,000

 

  Loss on Issue of Debentures A/c Dr.   4,000  

 

To 12% Debentures A/c

 

 

40,000

 

To Securities Premium A/c

 

 

4,000

    To Premium on Redemption A/c     4,000

 

(Debenture of Rs 40,000 issued at 10% premium with the term payable at 10% premium)

 

 

 

 

 

 

 

 

Page No 9.55:

Question 34:

Footfall Ltd. issues 10,000 Debentures of ₹ 100 each at a discount of 10% redeemable at a premium of 5% after the expiry of three years.
Pass Journal entries for the issue of these debentures.

Answer:

Books of Footfall Ltd.

Journal

Date

Particulars

L.F.

Debit Amount

Rs

Credit Amount

Rs

 

Bank A/c

Dr.

 

9,00,000

 

 

To Debenture Application A/c

 

 

9,00,000

 

(Debenture application money received for 10,000 debentures at Rs 90 each)

 

 

 

 

 

 

 

 

 

Debenture Application A/c

Dr.

 

9,00,000

 

 

Discount on Issue of Debenture A/c

Dr.

 

1,00,000

 

 

Loss on issue of Debentures A/c

Dr.

 

50,000

 

 

To Debentures A/c

 

 

10,00,000

 

To Premium on Redemption A/c

 

 

50,000

 

(10,000 Debentures of Rs 100 each issued at 10% discount with the term repayable at 5% redemption)

 

 

 

 

 

 

 

 

 

Debentures A/c

Dr.

 

10,00,000

 

 

Premium on Redemption A/c

Dr.

 

50,000

 

 

To Debentureholders’ A/c

 

 

10,50,000

 

(Debentures due for redemption along with premium on redemption)

 

 

 

 

 

 

 

 

 

Debentureholders’ A/c

Dr.

 

10,50,000

 

 

To Bank A/c

 

 

10,50,000

 

(Amount due for redemption paid to debenture holders)

 

 

 

 

 

 

 

 

 

Page No 9.55:

Question 35:

Pass necessary Journal entries relating to the issue of debentures for the following:
(a) Issued  ₹ 4,00,000; 9% Debentures of  ₹ 100 each at a premium of 8% redeemable at 10% premium.
(b) Issued  ₹ 6,00,000; 9% Debentures of ₹ 100 each at par, repayable at a premium of 10%.
(c) Issued ₹ 10,00,000; 9% Debentures of ₹ 100 each at a premium of 5%, redeemable at par.

Answer:

Journal

Date

Particulars

L.F.

Debit

Amount

Rs

Credit 

Amount

Rs

(a)

Bank A/c

Dr.

 

4,32,000

 

 

To Debenture Application and Allotment A/c

 

 

 

4,32,000

 

(Application money received on 4,000 9%  Debentures)

 

 

 

 

 

 

 

 

 

Debenture Application and Allotment A/c

Dr.

 

4,32,000

 

 

Loss on Issue of Debenture A/c

Dr.

 

40,000

 

 

To 9% Debentures A/c

 

 

 

4,00,000

 

To Securities Premium Reserve A/c

 

 

 

32,000

 

To Premium on Redemption of debentures A/c

 

 

 

40,000

 

(4,000; 9% Debentures issued at a premium of Rs 8 and redeemable at premium of 10%)

 

 

 

 

 

 

 

 

(b)

Bank A/c

Dr.

 

6,00,000

 

 

To Debenture Application and Allotment A/c

 

 

 

6,00,000

 

(Application money received on 6,000 9% Debentures)

 

 

 

 

 

 

 

 

 

Debenture Application and Allotment A/c

Dr.

 

6,00,000

 

 

Loss on Issue of Debenture A/c

Dr.

 

60,000

 

 

To 9% Debentures A/c

 

 

 

6,00,000

 

To Premium on Redemption of Debentures A/c

 

 

 

60,000

 

(6,000; 9% Debentures issued at par and redeemable at premium of 10%)

 

 

 

 

 

 

 

 

(c)

Bank A/c

Dr.

 

10,50,000

 

 

To Debenture Application and Allotment A/c

 

 

 

10,50,000

 

(Application money received on 10,000 9%Debentures)

 

 

 

 

 

 

 

 

 

Debenture Application and Allotment A/c

Dr.

 

10,50,000

 

 

To 9% Debentures A/c

 

 

 

10,00,000

 

To Securities Premium Reserve A/c

 

 

 

50,000

 

(1,000; 9% Debentures issued at a premium of Rs 5)

 

 

 

 

 

 

 

 

 

Page No 9.55:

Question 36:

Pass necessary Journal entries relating to the issue of  debentures for the following:
(a) Issued  ₹ 28,000; 10% Debentures of  ₹ 100 each at a premium of 15% redeemable at par.
(b) Issued  ₹ 30,000; 10% Debentures of  ₹ 100 each at a premium of 10% and redeemable at a premium of 15%.
(c) Issued  ₹ 80,000; 10% Debentures of  ₹ 100 each at par repayable at a premium of 10%.

Answer:

Journal

Date

Particulars

L.F.

Debit

Amount

Rs

Credit 

Amount

Rs

(a)

Bank A/c (280 debentures × 115)

Dr.

 

32,200

 

 

To Debenture Application and Allotment A/c

 

 

 

32,200

 

(Application money received)

 

 

 

 

 

 

 

 

 

Debenture Application and Allotment A/c

Dr.

 

32,200

 

 

To 10% Debentures A/c

 

 

 

28,000

 

To Securities Premium Reserve A/c

 

 

 

4,200

 

(280; 10% Debentures issued at a premium of 15%)

 

 

 

 

 

 

 

 

(b)

Bank A/c

Dr.

 

33,000

 

 

To Debenture Application and Allotment A/c

 

 

 

33,000

 

(Application money received)

 

 

 

 

 

 

 

 

 

Debenture Application and Allotment A/c

Dr.

 

33,000

 

 

Loss On Issue of debentures A/c

Dr.

 

4,500

 

 

To 10% Debentures A/c

 

 

 

30,000

 

To Securities Premium Reserve A/c

 

 

 

3,000

 

To Premium on Redemption of debentures A/c

 

 

 

4,500

 

(300; 10% Debentures issued at a premium of 10% and redeemable at a premium of 15%)

 

 

 

 

 

 

 

 

(c)

Bank A/c

Dr.

 

80,000

 

 

To Debenture Application and Allotment A/c

 

 

 

80,000

 

(Application money received)

 

 

 

 

 

 

 

 

 

 

Debenture Application and Allotment A/c

Dr.

 

80,000

 

 

Loss On Issue of debentures A/c

Dr.

 

8,000

 

 

To 10% Debentures A/c

 

 

 

80,000

 

To Premium on Redemption of debentures A/c

 

 

 

8,000

 

(800; 10% Debentures issued at par and redeemable at premium of 10%)

 

 

 

 

 

 

 

 

 



Page No 9.56:

Question 37:

Journalise the following transaction at the time of issue of 12% Debentures:
Nandan Ltd. issued ₹90,000, 12% Debentures of ₹ 100 each at a discount of 5% redeemable at 110%.

Answer:

Journal
Date
Particulars
L.F.
Debit
Amount
(₹)
Credit
Amount
(₹)
 
Bank A/c
Dr.
 
85,500
 
    To Debenture Application and Allotment A/c
 
 
 
85,500
  (Money received on the issue of debentures)
 
 
 
 
   
 
 
 
 
  Debenture Application and Allotment A/c
Dr.
 
85,500
 
  Loss on Issue of Debentures A/c
Dr.
 
13,500
 
    To 12% Debentures A/c
 
 
 
90,000
    To Premium on Redemption of Debentures A/c
 
 
 
9,000
  (Debenture application and allotment money transferred to Debentures A/c)
 
 
 
 

Page No 9.56:

Question 38:

Pass necessary Journal entries for the issue of debentures in the following cases:
(a)  ₹ 40,000; 12% Debentures of  ₹ 100 each issued at a premium of 5% redeemable at par.
(b) ₹ 70,000; 12% Debentures of  ₹ 100 each issued at a premium of 5% redeemable at ₹ 110.

Answer:

(a)

Journal

Date

Particulars

L.F.

Debit

Amount

Rs

Credit Amount

Rs

 

Bank A/c

Dr.

 

42,000

 

 

To Debenture Application A/c

 

 

 

42,000

 

(400 debentures issued at Rs 100 at a premium of 5%)

 

 

 

 

 

 

 

 

 

 

Debenture Application A/c

Dr.

 

42,000

 

 

To 12% Debenture A/c

 

 

 

40,000

 

To Securities Premium A/c

 

 

 

2,000

 

(400 debentures issued at a premium of 5% and redeemable at par)

 

 

 

 

 

 

 

 

 

 

(b)

 

Journal

Date

Particulars

L.F.

Debit

Amount

Rs

Credit Amount

Rs

 

Bank A/c

Dr.

 

73,500

 

 

To Debenture Application A/c

 

 

 

73,500

 

(700 debentures issued at Rs 100 at a premium of 5%)

 

 

 

 

 

 

 

 

 

 

Debenture Application A/c

Dr.

 

73,500

 

 

Loss on Issue of Debentures A/c

Dr.

 

7,000

 

 

To 12% Debenture A/c

 

 

 

70,000

 

To Securities Premium A/c

 

 

 

3,500

 

To Premium on Redemption A/c

 

 

 

7,000

 

(70,000 debentures issued at a premium of 5% and redeemable at Rs 110)

 

 

 

 

 

 

 

 

 

 

 

Page No 9.56:

Question 39:

Pass necessary Journal entries for the issue of Debentures in the following cases:
(a)  ₹ 40,000; 15% Debentures of  ₹ 100 each issued at a discount of 10% redeemable at par.
(b)  ₹ 80,000; 15% Debentures of  ₹ 100 each issued at a premium of 10% redeemable at a premium of 10%.

Answer:

(a)

Journal

 

Date

Particulars

L.F.

Debit

Amount

Rs

Credit Amount

Rs

 

Bank A/c

Dr.

 

36,000

 

 

  To Debenture Application A/c

 

 

 

36,000

 

(400 debentures issued at Rs 100 at discount of 10%)

 

 

 

 

 

 

 

 

 

 

 

Debenture Application A/c

Dr.

 

36,000

 

 

Discount on Issue of Debentures A/c

Dr.

 

4,000

 

 

  To 15% Debenture A/c

 

 

 

40,000

 

(400 debentures issued at discount and redeemable at a par )

 

 

 

 

 

 

 

 

 

 

 

(b)

Journal

 

Date

Particulars

L.F.

Debit

Amount

Rs

Credit Amount

Rs

 

Bank A/c

Dr.

 

88,000

 

 

  To Debenture Application A/c

 

 

 

88,000

 

(800 debentures issued at Rs 100 at a premium of 10%)

 

 

 

 

 

 

 

 

 

 

 

Debenture Application A/c

Dr.

 

88,000

 

 

Loss on Issue of Debentures A/c

Dr.

 

8,000

 

 

  To 15% Debenture A/c

 

 

 

80,000

 

  To Premium on Redemption A/c

 

 

 

       8,000

 

  To Securities Premium A/c

 

 

 

8,000

 

(800 debentures issued at a premium of 10% and redeemable at a premium of 10%)

 

 

 

 

 

 

 

 

 

 

 

Page No 9.56:

Question 40:

XYZ  Ltd.issued 5,000 , 10% Debentures of  ₹ 100 each on 1st April, 2015 at a discount of 10% redeemable at a premium of 10% after 4 years. Give journal entries for the year ended 31st March, 2016, assuming that the interest was payable  half-yearly on 30th September and 31st March. Tax is to be deducted @ 10%.

Answer:

Books of XYZ Ltd.

Journal

Date

Particulars

L.F.

Debit Amount

Rs

Credit Amount

Rs

2015

 

 

 

 

April 01

Bank A/c

Dr.

 

4,50,000

 

 

To Debenture Application A/c

 

 

 

4,50,000

 

(Debenture application money received)

 

 

 

 

 

 

 

 

 

 

April 01

Debenture Application A/c

Dr.

 

4,50,000

 

 

Loss on Issue of Debentures A/c

Dr.

 

1,00,000

 

 

To 10% Debentures A/c

 

 

 

5,00,000

 

To Premium on Redemption A/c

 

 

 

50,000

 

(5,000 Debentures of Rs 100 each issued at 10% discount with the term repayable at a premium of 10%)

 

 

 

 

2015

 

 

 

 

 

Sept. 30

Interest on Debentures A/c

Dr.

 

25,000

 

 

To Debentureholders’ A/c

 

 

 

22,500

    To Income Tax Payable A/c       2,500

 

(Interest due on 10% Debentures)

 

 

 

 

 

 

 

 

 

 

Sept. 30

Debentureholders’ A/c

Dr.

 

22,500

 

 

To Bank A/c

 

 

 

22,500

 

(Interest on debentures paid to debenture holders)

 

 

 

 

           
Sept. 30 Income Tax Payable A/c Dr.   2,500  
    To Bank A/c       2,500
  (Payment of tax on interest on debentures)        
           

2016

 

 

 

 

 

March 31

Interest on Debentures A/c

Dr.

 

25,000

 

 

To Debentureholders’ A/c

 

 

 

22,500

     To Income Tax Payable A/c       2,500

 

(Interest due on 10% Debentures)

 

 

 

 

 

 

 

 

 

 

March 31

Debentureholders’ A/c

Dr.

 

22,500

 

 

To Bank A/c

 

 

 

22,500

 

(Debenture Interest paid to Debenture holders)

 

 

 

 

           
March 31 Income Tax Payable A/c Dr.   2,500  
    To Bank A/c       2,500
  (Payment of tax on interest on debentures)        
           

March 31

Profit and Loss A/c

Dr.

 

50,000

 

 

To Interest on Debentures A/c

 

 

 

50,000

 

(Interest on debentures transferred to Profit and Loss Account)

 

 

 

 

 

 

 

 

 

 

Working Note:

Interest on Debentures (for half year) = 5,00,000 × 10100 × 612 = Rs 25,000

Page No 9.56:

Question 41:

Bright Ltd. issued 5,000; 10% Debentures of  ₹ 100 each on 1st April, 2015 . The issue was fully subscribed . According to the terms of issue, interest on the debentures is payable half-yearly on 30th  September and 31st March and the tax deducted at source is 10%.
Pass necessary journal entries related to the debenture interest for the year ending 31st March , 2016 and transfer of interest on debentures of the year to the Statement of Profit and Loss .

Answer:

Journal

In the books of Bright Ltd.

Date

Particulars

L.F.

Debit

Amount

(Rs)

Credit

Amount

(Rs)

2016

 

 

 

 

 

Mar. 31

Debentures Interest A/c

Dr.

 

25,000

 

 

            To Debenture Holder’s A/c

 

 

 

22,500

 

            To Income Tax Payable A/c

 

 

 

2,500

 

(Debentures interest due)

 

 

 

 

 

 

 

 

 

 

 

Debenture Holder’s A/c

Dr.

 

22,500

 

 

Income Tax Payable A/c

 

 

2,500

 

 

To Bank A/c

 

 

 

25,000

 

(Interest on debentures paid)

 

 

 

 

 

 

 

 

 

 

Mar. 31

Statement of Profit & Loss A/c

Dr.

 

50,000

 

 

            To Debentures Interest A/c

 

 

 

50,000

 

(Interest transferred to profit and loss)

 

 

 

 

 

 

 

 

 

 

Page No 9.56:

Question 42:

On 1st April, 2015, V.V.L.Ltd issued 1,000, 9% Debentures of  ₹ 100 each at a  discount of 6%, redeemable at a premium of 10% after three years. Pass necessary journal entries for the issue of debentures and debenture interest for the year ended 31st March, 2016, assuming that interest is payable on 30th September and 31st March and the rate of tax deducted at source is 10%. The company closes its books on 31st March every year.

Answer:

Journal
Date
Particulars
L.F.
Debit
Amount
(₹)
Credit
Amount
(₹)
2015
 
 
 
 
 
Apr. 01
Bank A/c
Dr.
 
94,000
 
    To Debenture Application and Allotment A/c
 
 
 
94,000
  (Money received on the issue of debentures)
 
 
 
 
   
 
 
 
 
  Debenture Application and Allotment A/c
Dr.
 
94,000
 
  Loss on Issue of Debentures A/c
Dr.
 
16,000
 
    To 9% Debentures A/c
 
 
 
1,00,000
    To Premium on Redemption of Debentures A/c
 
 
 
10,000
  (Debenture application and allotment money transferred to Debentures A/c)
 
 
 
 
   
 
 
 
 
Sept 30 Debenture Interest A/c
Dr.
 
4,500
 
    To Debenture holders’ A/c
 
 
 
4,050
    To TDS Payable A/c
 
 
 
450
  (Interest due)
 
 
 
 
   
 
 
 
 
  Debenture holders’ A/c
Dr.
 
4,050
 
    To Bank A/c
 
 
 
4,050
  (Payment of interest)
 
 
 
 
   
 
 
 
 
  TDS Payable A/c
Dr.
 
450
 
    To Bank A/c
 
 
 
450
  (Payment of tax)
 
 
 
 
2016  
 
 
 
 
Mar 31 Debenture Interest A/c
Dr.
 
4,500
 
    To Debenture holders’ A/c
 
 
 
4,050
    To TDS Payable A/c
 
 
 
450
  (Interest due)
 
 
 
 
   
 
 
 
 
  Debenture holders’ A/c
Dr.
 
4,050
 
    To Bank A/c
 
 
 
4,050
  (Payment of interest)
 
 
 
 
   
 
 
 
 
  TDS Payable A/c
Dr.
 
450
 
    To Bank A/c
 
 
 
450
  (Payment of tax)
 
 
 
 

Page No 9.56:

Question 43:

 
Kitply Ltd.issued  ₹ 2,00,000, 10% Debentures  at a discount of 5% .The terms of issue provide the repayment at the end of 4 years . Kitply Ltd.has a balance of ₹ 5,00,000 in Securities Premium Reserve . The company decided to write off  discount on issue of debentures from Securities Premium Reserve in the first year.
Pass the journal entry.
 

Answer:

Journal

Date

Particulars

L.F.

Debit

Amount

(Rs)

Credit

Amount

(Rs)

 

 

 

 

 

 

 

Security Premium Reserve A/c

Dr.

 

10,000

 

 

     To Discount on Issue of Debentures A/c

 

 

 

10,000

 

(Discount on Issue of Debentures written off)

 

 

 

 

 

 

 

 

 

 

Note: Discount on issue of Debentures = 2,00,000×5% = Rs 10,000

Page No 9.56:

Question 44:

A limited company issued ₹ 1,00,000, 9% Debentures at a discount of 6% on 1st April, 2017. These debentures are to be redeemed equally, spread over 5 annual instalments.

Pass the Journal entries for issue of debentures and writing off the discount.

Answer:

In the books of S. Singh Ltd.

Journal

Date

Particulars

 

L.F.

Debit Amount (₹)

Credit Amount (₹)

2017

 

 

 

 

 

April 01

Bank A/c

Dr.

 

94,000

 

 

  To Debentures Application & Allotment A/c

 

 

 

94,000

 

(Being application money received on 9% Debentures issued at 6% discount)

 

 

 

 

 

 

 

 

 

 

April 01

Debentures Application & Allotment A/c

Dr.

 

94,000

 

 

Discount on Issue of Debentures A/c

Dr.

 

6,000

 

 

  To 9% Debentures A/c

 

 

 

1,00,000

 

(Being application & allotment money adjusted)

 

 

 

 

2018

 

 

 

 

 

March 31

Statement of Profit & Loss A/c

Dr.

 

6,000

 

 

  To Discount on Issue of Debentures A/c

 

 

 

6,000

 

(Being discount on issue of debentures written off)

 

 

 

 

Page No 9.56:

Question 45:

On 1st January, 2017, Raha Ltd. issued 6,000, 8% Debentures of nominal (face) value of ₹ 100 each redeemable at 5% premium in equal proportions at the end of 5, 10 and 15 years. It has a balance of ₹ 10,000 in Securities Premium Reserve.
Pass Journal entries. Also give Journal entries for writing off Loss on Issue of Debentures.

Answer:

In the books of Raha Ltd.

Journal

Date

Particulars

 

L.F.

Debit
Amount
(₹)

Credit
Amount
(₹)

2017

 

 

 

 

 

January 01

Bank A/c (6,000 × 100)

Dr.

 

6,00,000

 

 

  To Debentures Application & Allotment A/c (6,000 × 100)

 

 

 

6,00,000

 

(Being application money received on 8% Debentures issued)

 

 

 

 

 

 

 

 

 

 

January 01

Debentures Application & Allotment A/c

Dr.

 

6,00,000

 

 

Loss on Issue of Debentures A/c

Dr.

 

30,000

 

 

  To 8% Debentures A/c

 

 

 

6,00,000

 

  To Premium on Redemption of Debentures A/c

 

 

 

30,000

 

(Being application & allotment money adjusted along with 5%

 

 

 

 

 

premium payable on redemption)

 

 

 

 

2017

 

 

 

 

 

 December 31 Securities Premium Reserve A/c

Dr.

 

10,000

 

  Statement of Profit & Loss A/c

Dr.

 

20,000

 

 

  To Loss on Issue of Debentures A/c

 

 

 

30,000

 

(Being loss on issue of debentures written off)

 

 

 

 

Page No 9.56:

Question 46:

Global Ltd. issued 10,000, 8% Debentures of  ₹ 100 each redeemable in four equal instalments by draw of lots from the end of 3 years at a premium of ₹ 9.
Pass the Journal entries for writing off the Loss on Issue of Debentures. Also prepare Loss on issue of Debentures Account.

Answer:

In the books of Raha Ltd.

Journal

Date

Particulars

 

L.F.

Debit
Amount
(₹)

Credit
Amount
(₹)

By the end of year of Allotment

Statement of Profit & Loss A/c

Dr.

 

90,000

 

  To Loss on Issue of Debentures A/c

 

 

 

90,000

(Being loss on issue of debentures written off)

 

 

 

 

 

Dr.

Loss on Issue of Debentures A/c

Cr.

Date

Particulars

Amount

(₹)

Date

Particulars

Amount

(₹)

On the date of Issue To 8% Debentures A/c

90,000

By the end of Year of allotment By Statement of Profit & Loss A/c

90,000

           
   

90,000

   

90,000

   

 

   

 



Page No 9.57:

Question 47:

On 1st June, 2017, R Energy Ltd. issued 10,000, 7% Debentures of  ₹ 100 each at a discount of 10% redeemable at a premium of 10% at the end of five years. All the debentures were subscribed and allotment was made.

Prepare the Balance Sheet (extract) as at 31st March, 2018.

Answer:

In the books of R Energy Ltd.

An Extract of Balance Sheet

As at 31st March, 2018

Particulars

Note No.

Amount
(₹)

I. EQUITIES AND LIABILITIES

 

 
   1. Shareholders’ Funds

 

 

       Reserves and Surplus

3

(2,00,000)

  2. Non-Current Liabilities

 

 

      a. Long-term Borrowings

1

10,00,000

      b. Other long-term Liabilities

2

1,00,000

 

 

 

Total

 

9,00,000

 

 

 

II. Assets

 

 

    Current Assets

 

 

    Cash and Cash Equivalents

4

9,00,000

 

 

 

Total

 

9,00,000

 

 

 

 
Notes to Accounts:

Note
No.

Particulars

 

Amount

(₹)

1. Long-term Borrowings

 

 

  10,000, 7% Debentures of ₹100 each issued at

 

10,00,000

   

 

 

2. Other long-term Liabilities

 

 

  Premium on Redemption of Debentures

 

1,00,000

   

 

 

3. Reserves and Surplus

 

 

  Statement of Profit & Loss

 

 

    Less: Loss on Issue of Debentures written off

(2,00,000)

(2,00,000)

     

 

4. Cash and Cash Equivalents

 

  On 7% debentures @ 90 each (10,000 × 90)

9,00,000

Page No 9.57:

Question 48:

On 1st April, 2017, Solar Power Ltd. issued 10,000, 8% Debentures of ₹ 100 each at a discount of 5% redeemable at a premium of 15% at the end of five years. All the debentures were subscribed and allotment was made. The company had balance in Securities Premium Reserve of ₹ 80,000.
Prepare the Balance Sheet (extract) as at 31st March, 2018.

Answer:

In the books of Solar Power Ltd.

An Extract of Balance Sheet

As at 31st March, 2018

Particulars

Note
No.

Amount
(₹)

I. EQUITIES AND LIABILITIES

 

 
   1. Shareholders’ Funds

 

 

       Reserves and Surplus

3

(1,20,000)

   2. Non-Current Liabilities

 

 

       a. Long-term Borrowings

1

10,00,000

       b. Other long-term Liabilities

2

1,50,000

 

 

 

 

 

 

II. Assets

 

 

    Current Assets

 

 

    Cash and Cash Equivalents

4

9,50,000

 

 

 

 

 

 

 

 

 

         
Notes to Accounts:

Note
No.

Particulars

Amount
(₹)

1. Long-term Borrowings

 

 

  10,000, 8% Debentures of ₹100 each issued

 

10,00,000

   

 

 

2. Other long-term Liabilities

 

 

  Premium on Redemption of Debentures

 

1,50,000

   

 

 

3. Reserves and Surplus

 

 

  Securities Premium Reserve

80,000

 

    Less: Loss on Issue of Debentures written off

(80,000)

 

  Statement of Profit and Loss

 

    Less: Loss on Issue of Debentures written off

(1,20,000)

(1,20,000)

     

 

4. Cash and Cash Equivalents  

 

  On 8% debentures @ 95 each (10,000 × 95)  

9,50,000

Page No 9.57:

Question 49:

On 1st April, 2015. Mathew Ltd. issued 10,000, 9% Debentures of ₹ 100 each at a discount of 5%, redeemable at a premium of 5%. These debentures were redeemable as follows:
 

On 31st March, 2016 2,000 Debentures;
On 31st March, 2017 5,000 Debentures;
On 31st March, 2018 3,000 Debentures.

Prepare the Loss on Issue of Debentures Account, Debentures Account and Premium on Redemption of Debentures Account for three years.

Answer:

 

In the books of Mathew Ltd.

 

Dr.

Loss on Issue of Debentures A/c

Cr.

Date

Particulars

Amount

(₹)

Date

Particulars

Amount

(₹)

2015  

 

2016  

 

April 01 To 9% Debentures A/c        

1,00,000

March 31 By Statement of Profit & Loss A/c

1,00,000

   

 

   

 

   

1,00,000

   

1,00,000

   

 

   

 

 

Dr.

9% Debentures A/c

Cr.

Date

Particulars

Amount

(₹)

Date

Particulars

Amount

(₹)

2016  

 

2015  

 

March 31 To Debentureholders A/c

2,00,000

April 01 By Debenture Application & Allotment A/c

9,50,000

March 31 To balance c/d

8,00,000

April 01 By Loss on Issue of Debentures A/c

50,000

   

 

   

 

   

10,00,000

   

10,00,000

2017  

 

2016  

 

March 31 To Debentureholders A/c

5,00,000

April 01 By balance b/d

8,00,000

March 31 To balance c/d

3,00,000

   

 

   

 

   

 

   

8,00,000

   

8,00,000

2018  

 

2017  

 

March 31 To Debentureholders A/c

3,00,000

April 01 By balance b/d

3,00,000

   

 

   

 

   

3,00,000

   

3,00,000

   

 

   

 

 

Dr.

Premium on Redemption of Debentures A/c

Cr.

Date

Particulars

Amount

(₹)

Date

Particulars

Amount

(₹)

2016  

 

2015  

 

March 31 To Debentureholders A/c       

10,000

April 01 By Loss on Issue of Debentures A/c

50,000

March 31 To balance c/d

40,000

   

 

   

 

   

 

   

50,000

   

50,000

2017  

 

2016  

 

March 31 To Debentureholders A/c

25,000

April 01 By balance b/d

40,000

March 31 To balance c/d

15,000

   

 

   

 

   

 

   

40,000

   

40,000

2018  

 

2017  

 

March 31 To Debentureholders A/c

15,000

April 01 By balance b/d

15,000

   

 

   

 

   

15,000

   

15,000

           

Page No 9.57:

Question 50:

Office Products Ltd, issued on 1st April, 2018, 20,000, 9% Debentures of ₹ 100 each at a premium of 10% redeemable at a premium of 5% after 5 years. Issue price was payable along with application. Pass the necessary Journal entries.

Answer:

In the books of Office Products Ltd.

Journal

Date

Particulars

 

L.F.

Debit Amount (₹)

Credit Amount (₹)

2018

 

 

 

 

 

April 01

Bank A/c

Dr.

 

22,00,000

 

 

   To Debentures Application and Allotment A/c

 

 

 

22,00,000

 

(Being application money received on 20,000 debentures)

 

 

 

 

 

 

 

 

 

 

April 01

Debentures Application and Allotment A/c

Dr.

 

22,00,000

 

 

Loss on Issue of Debentures A/c

Dr.

 

1,00,000

 

 

   To 9% Debentures A/c

 

 

 

20,00,000

 

   To Securities Premium Reserve A/c

 

 

 

2,00,000

 

   To Premium on Redemption of Debentures A/c

 

 

 

1,00,000

 

(Being application and allotment money adjusted and 5% premium on redemption of debentures too)

 

 

 

 

 

 

 

 

 

 

2019

 

 

 

 

 

March 31

Securities Premium Reserve A/c

Dr.

 

1,00,000

 

 

   To Loss on Issue of Debentures A/c

 

 

 

1,00,000

 

(Being loss on issue of debentures written off)

 

 

 

 



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