Question

A company issues the following debentures:

(i) 10,000, 12% debentures of Rs 100 each at par but redeemable at premium of 5% after 5 years;

(ii) 10,000, 12% debentures of Rs 100 each at a discount of 10% but redeemable at par after 5 years;

(iii) 5,000, 12% debentures of Rs 1,000 each at a premium of 5% but redeemable at par after 5 years;

(iv) 1,000, 12% debentures of Rs 100 each issued to a supplier of machinery costing Rs 95,000. The debentures are repayable after 5 years; and

(v) 300, 12% debentures of Rs 100 each as a collateral security to a bank which has advanced a loan of Rs 25,000 to the company for a period of 5 years.

Pass the journal entries to record the: (a) issue of debentures; and (b) repayment of debentures after the given period.

Answer 1

In the books of …………..

Journal

a) Issue of Debentures

S. No.	Particulars				L.F.	Debit Amount Rs	Credit Amount Rs
(i)	Bank A/c			Dr.		10,00,000
		To 12% Debenture Application A/c					10,00,000
	(Debenture Application money of 10,000 12% debentures @ 100 each received)
	12% Debenture Application A/c			Dr.		10,00,000
	Loss on Issue of Debenture A/c			Dr.		50,000
		To 12% Debenture A/c					10,00,000
		To Premium on Redemption of Debenture A/c					50,000
	(Debenture Application money of 10,000 12% debentures @ Rs 100 each transferred to 12% Debentures Account and the Debentures are issued with term of repayable at 5% premium)
(ii)	Bank A/c			Dr.		9,00,000
		To Debenture Application and Allotment A/c					9,00,000
	(Debenture Application money received excluding discount on issue)
	12% Debenture Application & Allotment A/c			Dr.		9,00,000
	Discount on Issue of Debenture A/c			Dr.		1,00,000
		To Debentures A/c					10,00,000
	(Debenture Allotment made due)
(iii)	Bank A/c			Dr.		52,50,000
		To Debenture Application and Allotment A/c					52,50,000
	(Debenture Application money received)
	Debenture Application and Allotment A/c			Dr.		52,50,000
		To Debenture A/c					50,00,000
		To Security Premium A/c					2,50,000
	(Allotment of debenture at premium)
(iv)	Machinery A/c			Dr.		95,000
		To Vender A/c					95,000
	(Machinery purchased from supplier)
	Vender A/c			Dr.		95,000
	Discount on Issue of Debenture			Dr.		5,000
		To 12% Debenture A/c					1,00,000
	(Debenture issue at discount to vender of machinery)
(v)	12% Debenture Suspense A/c			Dr.		30,000
		To Debenture A/c					30,000
	(300, 12% Debentures of Rs 100 each issued as collateral security to the bank against a loan of Rs 25,000)

b) Repayment of Debentures

S.No.	Particulars				L.F.	Debit Amount Rs	Credit Amount Rs
(i)	12% Debentures A/c			Dr.		10,00,000
	Premium on Redemption of Debenture A/c			Dr.		50,000
		To Debenture Holders A/c					10,50,000
	(Amount due on redemption of debentures)
	Debenture Holders A/c			Dr.		10,50,000
		To Bank A/c					10,50,000
	(Payment made to Debenture Holders)
(ii)	12% Debenture A/c			Dr.		10,00,000
		To Debenture Holders A/c					10,00,000
	(Amount due on redemption of debentures)
	Debenture Holders A/c			Dr.		10,00,000
		To Bank A/c					10,00,000
	(Payment made to Debenture Holders)
(iii)	12% Debenture A/c			Dr.		50,00,000
		To Debenture Holders A/c					50,00,000
	(Amount due on redemption of debentures)
	Debenture Holders A/c			Dr.		50,00,000
		To Bank A/c					50,00,000
	(Payment made to Debenture Holders)
(iv)	12% Debenture A/c			Dr.		1,00,000
		To Vender A/c					1,00,000
	(Amount due to vender)
	Vender A/c			Dr.		1,00,000
		To Bank					1,00,000
	(Payment made to vender)
(v)	12% Debenture A/c			Dr.		30,000
		To Debenture Suspense A/c					30,000
	(Debenture and debenture Suspense Account closed)