Question

'Chennai Fibers Limited' was registered with an authorized capital of Rs 40,00,000 divided into 4,00,000 equity shares of Rs 10 each. The company had issued 1,00,000 shares and the dividend paid per share was Rs 3 for the year 2007 - 08. The management of the company decided to export its readymade apparels to European countries. To meet the requirement of additional funds, the finance manager put up before the Board of Directors the following three alternative proposals :

(1) An issue of 1,54,000 equity shares at par.

(2) Obtain a loan of Rs 15,40,000 from a financial institution for a period of 5 years. The loan was
available @ 12% per annum.

(3) Issue 16,000, 9% debentures of Rs 100 each at a discount of 10% redeemable in instalments at the end of the third, fourth, fifth and sixth year as per details are given below :

Year	Amount (Rs)
III	2,00,000
IV	3,00,000
V	4,00,000
VI	7,00,000

After Comparing the alternatives, the company decided in favour of the third alternative and issued debentures on 1.4.2008.

Prepare 9% debentures to account for the years 2008-09 to 2013-14.

Answer 1

9% Debentures A/c
Dr.							Cr.
Date	Particulars	J.F	Rs	Date	Particulars	J.F.	Rs
2008-09	To Balance c/d		16,00,000	2008-09	By Debenture Application A/c By Loss on Issue of Debentures A/c		14,40,000   1,60,000
			16,00,000				16,00,000
2009-10	To Balance c/d		16,00,000	2009-10	By Balance b/d		16,00,000
			16,00,000				16,00,000
2010-11	To Debenture holder’s A/c Balance c/d		2,00,000 14,00,000	2010-11	By Balance b/d		16,00,000
			16,00,000				16,00,000
2011-12	To Debenture holder’s A/c To Balance c/d		3,00,000 11,00,000	2011-12	By Balance b/d		14,00,000
			14,00,000				14,00,000
2012-13	To Debenture holder’s A/c To Balance c/d		4,00,000 7,00,000	2012-13	By Balance b/d		11,00,000
			11,00,000				11,00,000
2013-14	To Debenture holders A/c		7,00,000	2013-14	By Balance b/d		7,00,000
			7,00,000				7,00,000