DK Goel Solutions Class 12 Accountancy Chapter 8 Company Accounts Issue of Debentures

Short Answer Questions

Question 1.      Explain briefly issue of debentures at par, at discount and at premium. Taking imaginary examples pass necessary journal entries in all the cases.

Solution 1        Debentures may be issued either at par, at premium or at a discount.

Issue of Debentures at Par:-

Issue of Debentures at Discount:- There are no restrictions on the issue of debentures at discount, whereas shares cannot be issued at discount. 

Dev Ltd. issued 5,000, 10% Debentures of Rs. 100 each at a discount of 10%.

When the company issues debentures at a price which is lee then their face or nominal value, the debentures are said to have been issued at a discount. Discount or Loss on issue of debentures is a capital loss. It can be written off by debiting to securities premium reserve account or statement of profit or loss.

Question 2.      Can the debentures be issued for consideration other than cash? Give their journal entries.

Solution 2         A company purchases some assets from the vendor and instead of paying the vendor in cash, the company may decide to issue debentures to the vendor in payment of purchases consideration. Such an issue of debentures to vendors in known as issue of debentures for debentures for consideration other than cash.

Question 3.      Explain the meaning of debentures issued as collateral security.

Solution 3        When a company takes a loan from a Bank or from some other party, the company may have to issue debentures as a subsidiary or secondary security in addition to the principal security. Collateral security means secondary security in addition to the principal security. There are two methods of dealing with such debentures in the books of accounts of the company:-

1. First Method:- In this method, no entry need to be passed in the books of the company, as the debentures are not actually issued, but only given away as collateral security. As only for taking of a loan entry as passed:-

2. Second Method:- In this method, the entry for issuing debentures as collateral security is also recorded with the entry for taking the loan.

Question 4.        What is the nature of debenture interest? Give journal entries to record.

(a) When the interest is due; and

(b) When the interest is paid. Ignore tax.

Solution 4           (a) When the interest is due:-

If a Company pays interest on debentures half-yearly on 30^th June and 31^st December, while preparing the balance sheet on 31^st March, 2019, if the interest for the period ending 31^st December, 2018 remains unpaid, it will be called ‘Interest accrued and due’.

(b) When the interest is paid:-

If a Company pays interest on debentures half-yearly on 30^th June and 31^st December, while preparing the balance sheet on 31^st March, 2018 the interest for the period from 1^st January, 2018 to 31^st March, 2018 will be called ‘Interest accrued but not due’.

Question 5.      What is meant by ‘debentures issued at par but redeemable at premium?

Solution 5        The debentures are issued with the specific condition that the company will pay a premium at the time of their redemption. Although, such premium will be paid at the time of actual redemption, but as it is a known loss the Company records such loss at the time of issue by debiting an account called, “Loss on issue of debentures A/c”.

Example:- If a debenture of Rs. 100 is issued at Rs. 100 and is redeemable at Rs. 105, the following entries will be passed:

Entries For Issue:

Question 6.      What is meant by ‘debentures issued at discount and redeemable at premium’?

Solution 6        If a debenture of Rs. 100 is issued at Rs. 98 and is redeemable at Rs. 105 the following entries will be passed:-

Entries For Issue:

Question 7.      What are the alternatives available to a company for the allotment of debentures when there is overs-subscription of debentures?

Solution 7         Oversubscription of Debentures means that the company has received applications for more number of debentures than it has issued. In such a situation, the company may make allotment, by any of the following three options or combination:

First Alternative – Rejecting Excess Applications.

Second Alternative – Partial or pro-rata allotment.

Third Alternative – A combination of the Above two alternatives.

Question 8.      X Ltd. purchased assets of Rs. 8,40,000 and purchase consideration was paid by the issue of debentures at 5% Premium. Pass Journal entry.

Solution 8

Question 9.      What Journal Entry will be made in the books of the Company for an issue of 5,000, 15% Debentures of Rs. 100 each at par and are redeemable at a premium of 5%.

Solution 9

Question 10.   X Ltd. issued Rs. 2,00,000, 12% debentures of Rs. 100 each at a discount of 6% but repayable after 8 years at a premium of 5%. Pass journal entry for the issue.

Solution 10

Question 11.      K K Limited obtained a loan Rs. 10,00,000 from State Bank of India @ 9% interest. The company issued Rs. 15,00,000 9% debentures of Rs. 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 9% Debentures as collateral security.

(ii) When company decided to record the issue of 9% Debentures as collateral security.

Solution 11

Numerical Questions:-

Question 1.        X Ltd. Issued 2,000, 15 % debentures of Rs. 100 each at Par, payable as follows: Rs. 25 on Application; Rs. 25 on Allotment and Rs. 50 on First and Final Call.

Application were received for 3,000 debentures. Applications for 1,600 debentures were accepted in full. Applications for 600 debentures were allotted 400 debentures and the rest were rejected. All moneys due were received except final call on 100 debentures.

Pass necessary journal entries.

Solution 1   

Question 2.        Balaji Ltd. Issued 10,000, 13% Debentures of Rs. 100 each, payable as follows: Rs. 20 on application, Rs. 30 on allotment and Rs. 50 on first and final call.

All the debentures were applied. Ajay, the holder of 300 debentures paid the entire amount on his holding on allotment whereas Vijay, the holder of 200 debentures failed to pay the allotment and final call. Pass entries.

Solution 2

Question 3.        Kamal Ltd. Issued 5,000, 12 % Debentures of Rs. 100 each, payable as follows:

Rs. 10 on applications, Rs, 15 on allotment, Rs. 30 on first call and Rs. 45 on second and final call. A person who holds 400 debentures paid the amount of first and second calls with allotment. Another person who is holding 100 debentures failed to pay the amount due on allotment. He, however, pays this amount along with the first call money. Pass entries. 

Solution 3

Question 4.      Sunflower Ltd. Issued 40,00,000, 8% Debentures of Rs. 200 each at a premium of 6% payable as Rs. 80 on application and Rs. 132 on allotment. Debentures are redeemable after 7 years. Record entries assuming all the money is duly received.

Solution 4

Question 5.        X Ltd. Issued 5,000, 12 % Debentures of Rs. 100 each at a premium of Rs. 5 payables as follows:

On Application                  Rs. 30 (including premium)

On Allotment                    Rs. 40

On 1^st and Final Call        The Balance Amount 

Applications were received for 6,000 debentures and allotment was made pro-rata to all applicants. All the moneys were duly received. Pass necessary journal entries.

Solution 5

Question 6.        Nav Lakshmi Ltd. Invited application for issuing 3,000, 12 % debentures of Rs. 100 each at a premium of Rs. 50 per debenture. The full amount was payable on application.

Applications were received for 4,000 debentures. Applications for 1,000 debentures were rejected and application money was refunded. Debentures were allotted to the remaining applicants.

Pass necessary journal entries for the above transaction in the books of Nav Lakshmi Ltd.

Solution 6

Question 7.        R Ltd. Issued 8,000, 13 % Debentures of Rs. 100 each at discount of 5 % payable as follows:

On Application                      Rs. 25

On Allotment                         Rs. 25

On First and Final Call           The balance amount

Public applied for 6,000 debentures. All the moneys were duly received. Expenses on issue of debentures amounted to Rs. 20,000. Directors decided to write off  th of “Expenses on Issue A/c “and “Discount on Issue of Debentures A/c” from Statement of P & L each year.

 Pass Journal entries and show the above accounts in the Company’s Balance Sheet at the end of the year.

Solution 7

Question 8.      Pass journal entries in the books of Sharda Ltd. When the Co. issued 5,000, 7% debentures of Rs. 100 each at a discount of 6%.

Solution 8           

Question 9.        X Company purchased assets of the book value pf Rs. 10,45,000 from Y Co. It was agreed that the purchase consideration be paid by issuing 14% Debentures of Rs. 100 each. Assume debentures have been issued (i) at par, (ii) at a discount of 5%, and (iii) at a premium of 10%.

Give necessary journal entries in the books of X Company.

Solution 9           

Question 10.   Golden ltd. Bought assets for Rs. 50,00,000 and assumed liabilities worth Rs. 1,26,00,000 from Silver ltd. And issued 8% debentures of Rs. 500 each at a premium of 6%. Record necessary entries in the books of Golden Ltd. 

Solution 10

Question 11.   Sudhir Ltd. Took over Assets of Rs. 8,50,000 and Liabilities of Rs. 1,50,000 of Gopal Ltd. At an agreed price pf Rs. 7,20,000. The purchase consideration was discharged by issuing 12 % debenture Rs. 100 each at premium of 20 %. Give journal entries in the books of Sudhir ltd.

Solution 11    

Question 12.   A Company purchased Assets of the books value of Rs. 12,00,000 and Liabilities of Rs. 2,20,000 of another Company for a purchase consideration of Rs. 9,40,000. The purchase consideration was discharged by the issue of debentures of Rs. 500 each at a discount of 6%. Pass journal entries in the books of purchasing company.

Solution 12

Question 13.      Gunjan Limited purchased a running business from Vrindavan Limited for a sum of Rs. 25,00,000, payable Rs. 4,00,000 by cheque and for the balance issued 8% debentures of Rs. 100 each at 5% premium.

The assets and liabilities consisted of the following :

Record necessary journal entries in the books of Gunjan Limited.

Solution 13

Question 14.   Y Ltd. Purchased machinery for Rs. 90,000. Half the amount was paid in Cash and the remaining half by the issue of 12 % Debentures of Rs. 100 each at a discount of 10% . Pass Journal entries.

Solution 14

Question 15.   J Ltd. Purchased machinery for Rs. 3,50,000 from K Ltd. On 28.2.2018. Rs. 50,000 were paid to K Ltd. Immediately and the balance was paid by issue of 10% debentures of Rs. 3,10,000 in J Ltd. Pass the necessary journal entries for recording the transactions in the books of J ltd.

Solution 15

Question 16.   X Ltd. Purchased a building for Rs. 40,00,000 payable as 255 in Cash and balance by allotment of 7% debentures of Rs. 500 each at a premium of Rs. 20%. Give necessary journal entries.

Solution 16

Question 17.   X Ltd. Purchased assets pf Rs. 8,00,000 and liabilities of Rs. 1,00,000 from Y Ltd. On 1.4.2018. Rs. 2,00,000 were paid immediately and the balance was paid by issue of Rs. 4,75,000, 10% debentures in X Ltd. Give journal entries in the book of X Ltd.

Solution 17

Question 18.      Star textiles ltd. Purchased assets of Modern textiles Ltd. As under;

Land and Buildings of Rs. 25,00,000 at Rs. 40,00,000; Plant and Machinery of Rs. 10,00,000 for Rs. 7,50,000 and Furniture od Rs. 3,00,000 for Rs. 1,00,000 for purchase consideration of Rs. 45,00,000. Star Textiles Ltd. Paid Rs. 3,00,000 in Cash and Remaining by issue of 9% Debentures of Rs. 500 each at a premium of 5%. record necessary entries in the books of Star Textiles Ltd.

Solution 18

Question 19.      Disha Ltd. Purchased machinery form Nisha Ltd. and paid to Nisha Ltd. as follows:

(i)                  By issuing 10,000, equity shares of Rs. 10 each at a premium of 10%.

(ii)                By issuing 200, 9% debentures of Rs. 100 each at a discount of 10%.

(iii)               Balance by accepting a bill of exchange of Rs. 50,000 payables after one month.

Pass necessary journal entries in the books of Disha Ltd. for the purchases of machinery and making payment  to Nisha Ltd.

Solution 19

Question 20.      S. Singh Limited obtained a loan of Rs.5,00,000 from State Bank of India @ 10% on iterest. The company issued Rs. 7,50,000, 10% debentures of Rs. 100 each, in favor of State Bank of India as collateral security. Pass 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.

Solution 20

Question 21.   Hassan Limited took a loan of Rs. 30,00,000 from a bank against primary security worth Rs. 40,00,000 and issued 35,000, 6% debentures of Rs. 100 each as a collateral security. The company again after one year took a loan of Rs. 50,00,000 from bank against Plant as primary security and deposited 60,000, 6% debentures of Rs. 100 each as collateral security. Record necessary journal entries. How will you show the issue of debentures and bank Loan in the balance sheet of the company.

Solution 21

Question 22.      India ltd. made the following issue of 6% debentures:

(i)                  For cash at 90 %, 6,000 debentures of Rs. 100 each.

(ii)                1,100 debentures of Rs. 100 each to a creditor regarding machinery costing Rs. 1,00,000.

(iii)               To bank for a loan of Rs. 7,00,000 as collateral security 10,000 debentures of Rs. 100 each.

Prepare necessary entries. The issue (i) and (ii) are redeemable at the end of five years at par. Show the Balance Sheet of the Company at the end of first year.

Solution 22

Question 23.   X Ltd. issued 25,000, 9% debentures of Rs. 100 each at apremium of Rs, 4 per debenture on 1^st April 2017. On the same date it purchased fixed assets of Rs. 10,00,000 and took over current liabilities of Rs. 70,000 of Y Ltd. and paid Rs. 4,00,000 in Cash and remaining by issue of Rs. 5,00,000, 9% debentures at a premium of 6%. On the same date it took a loan from the Bank for Rs. 6,00,000 and issued 9% debentures as collateral security. Give entries and the extract of Balance Sheet on 32st March, 2018. Ignore intrest.

Solution 23

Question 24.      Usha Ltd. issued 30,000, 10% Debentures of Rs. 100 each as collateral security for a loan of Rs. 24,00,000 from Axis Bank. The company was unable to repay the loan on which interest payable was Rs. 6,00,000 as on 31^st March, 2019.

Axis Bank, on 31^st March, 2019, exercised the right vested in it by way of debentures being issued as collateral Security.

Pass journal entries in the books of Usha Ltd. on 31^st March, 2019. 

Solution 24

Question 25.      What journal entries will be made in the following cases:

(i) A company issued Rs. 40,000, 12% Debentures at par, redeemable also at par.

(ii) A company issued Rs. 40,000, 12% Debentures at discount of 10%, redeemable at par.

(iii) A company issued Rs. 40,000, 12% Debentures at a premium of 5%, redeemable at par.

(iv) A company issued Rs. 40,000, 12% Debentures at par, redeemable at 10% premium; and

(v) A company issued Rs. 40,000, 12% Debentures at a discount of 5%, and redeemable at 5% premium.

Note The face value of a 12% Debenture is Rs. 100.

Solution 25

Question 26.      KTR Ltd., issued 365, 9% Debentures of Rs. 1,000 each on 4-3-2016.

Pass necessary Journal entries for the issue of debentures in the following situations:

(a) When debentures were issued at par redeemable at a premium of 10%.

(b) When debentures were issued at 6% discount redeemable at 5% premium. 

Solution 26         

Question 27.      Pass the necessary Journal entries for the issue of 7% debentures in the following cases:

(i) 100 debentures of Rs. 100 each issued at Rs. 105 each repayable at Rs. 100 each.

(ii) 100 debentures of Rs. 100 each issued at Rs. 100 each repayable at Rs. 105 each.

(iii) 100 debentures of Rs. 100 each issued at Rs. 105 each repayable at Rs. 108 each.

Solution 27

Question 28.   Luxury Cosmactics Ltd. issued 30,00,000, 9% debentures of Rs. 500 each at a discount of 4%, redeemable at a premium of 5% after 4 years payable as: Rs. 200 on application and balance on allotment. Record necessary entries for issue of debentures.

Solution 28

Question 29.      X Ltd. issued 5,000, 8% Debentures of Rs. 200 each at a premium of 6% redeemable at a premium of 5% after 5 year. According to the term of issue, Rs. 80 was payable on application and balance on allotment.

Record necessary Journal entries at the time of issue of Debentures.

Solution 29

Question 30.      On 1-4-2015, K.K. Ltd. issued 500, 9% Debentures of Rs. 500 each at a discount of 4%, redeemable at a premium of 5% after three years.

Pass necessary Journal Entries for the issue of debentures and debentures interest for the year ended 31-3-2016 assuming that interest is payable on 30^th September and 31^st March and the rate of tax deducted ata source is 10%. The company closes its books on 31^st March every year.

Solution 30

Question 31.      On 1^st April, 2018, King Electronics Ltd. issued 10,000, 8% Debentures of Rs. 100 each at a discount of 6% redeemable after 5 years. All the debentures were fully subscribed. It has a balance of Rs. 1,00,000 in Capital Reserve. It decided to write off discount in the first year itself from Capital Reserve.

Pass the Journal entries for issue of debentures and writing off the discount and prepare Discount on Issue of Debentures Account.

Solution 31

Question 32.      On 1^st July 2018, Z Ltd. issued 40,000, 9% Debentures of Rs. 100 each at 4% discount redeemable at 6% premium after five years. The debentures were fully subscribed. It has a balance of Rs. 2,00,000 in capital reserve and Rs. 1,40,000 in Securities Premium Reserve. It decided to write off the loss on issue of debentures in the first year itself.

Pass the journal entries for issue of debentures and writing off loss on issue of debentures.

Solution 32

Question 33.   Raj Ltd. purchases furniture costing Rs. 2,20,000. It was agreed that the purchase consideration be paid by issue of 15% debentures of Rs. 100 each. Assume debentures have been issued: (i) at par, and (ii) at a premium of 10%.

Solution 33

Question 34.   Ashok Ltd. purchased machinery costing Rs. 1,35,000. It was agreed that the purchase consideration be paid by issuing 12% debentures of Rs. 100 each. Assume debentures have issued (i) at par and (ii) at a discount of 10%.

Solution 34

Question 35.      Suvidha Ltd. purchased machinery for Rs. 1,98,000 from Suppliers Ltd. The payment was made by issue of 12% debentures of Rs. 100 each. Pass necessary journal entries for the purchases of machinery and issue of debentures when

(i) Debentures are issued at par.

(ii) Debentures are issued at 10% discount.

(iii) Debentures are issued at 10% premium.

Solution 35

Question 36.   Romi Ltd. acquired assets of Rs. 20 lakhs and took over creditors of Rs. 2 lakhs from Kapil Enterprises. Romi Ltd. issued 8% debentures of Rs. 100 each at a discount of 10% as purchase consideration. Record necessary journal entries in the books of Romi Ltd.

Solution 36

Question 37.      Deepak Ltd. purchased furniture for Rs. 2,20,000 from M/s Furniture Mart. 50% of the amount was paid to Furniture Mart by accepting a bill of exchange and for the balance the company issued 9% debentures of Rs. 100 each at a premium of 10%  in favour of furniture Mart.

Pass necessary journal entries in the books of Deepak Ltd. for the above transactions.

Solution 37

Question 38.      X Ltd. purchased assets of Y Ltd. as under:

Plant and Machinery      Rs. 8,00,000

Land and Building            Rs. 72,00,000

The purchase consideration was Rs. 80,00,000. Rs. 20,00,000 were paid through bank and the remaining by issue of 6% debentures of Rs. 100 each at a premium of 20%.

Pass necessary journal entries in the books of X Ltd.

Solution 38

Question 39.      Tushar Ltd. purchased assets of Rs. 14,40,000 and liabilities of Rs. 2,55,000 from Chander Ltd. on 1.4.2018. Rs. 2,40,000 were paid immediately. Pass Journal entries in the books of Tushare Ltd. if the balance was paid as follows:

Case (i) by issue of Rs. 9,00,000, 11% debentures in Tushare Ltd.

Case (ii) by issue of Rs. 10,50,000, 12% debentures in Tushare Ltd.

Solution 39

Question 40.   A Company purchased assets of the book value of Rs. 6,00,000 and took over liabilities of Rs. 1,50,000 from Golden Ltd. It was agreed that the purchases consideration settled at Rs. 4,80,000 be paid by issuing debentures of Rs. 100 each at a premium of 10%. It was further agreed that any fraction of the debenture be paid in cash. Give journal entries in the books of purchasing company.

Solution 40

Question 41.   X Ltd. took over assets Rs. 5,00,000 and liabilities of Rs. 1,00,000 of another company at an agreed price of Rs. 3,80,000. The purchase consideration was discharged by issuing debentures of Rs. 100 each at a discount of 10%. It was agreed that any fraction of the debenture be paid in cash. Give journal entries in the books of X Ltd.

Solution 41                                                                

Question 42.      Oberoi Ltd. took certain fixed assets for Rs. 6,30,000 from Vikram Ltd. and allotted 6,000, 12% Debentures at a premium of 5% to satisfy the purchases consideration. The Company then issued a prospectus inviting the public to subscribe to 20,000, 11% Debentures of Rs. 100 each at a discount of 2%, payable as Rs. 35 on application, Rs. 23 on allotment and the balance on first and final call.

Applications were received for 16,000 debentures only. All the applications were accepted and money received except first and final call on 100 debentures. Prepare the Cash Book and the Journal.

Solution 42

Question 43.   A company took a loan of Rs. 5,00,000 from State Bank of India and issued 10% debentures of Rs. 8,00,000 of Rs. 100 each as a collateral security. Explain how you will deal with issue of debentures in the books of company.

Solution 43

Question 44.     X Ltd. raised a bank loan of Rs. 10,00,000 and issued by way of collateral security 10,000, 12% Debentures of Rs. 100 each. The Company further issued to public 15,000, 12% Debentures of Rs. 100 each at 2% discount payable Rs. 30 on application, Rs. 18 on allotment, Rs. 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.

Solution 44

Question 45.      Z Ltd. issued 20,000, 12% Debentures of Rs. 100 each. Give journal entries if the Debentures are (1) issued at par, (2) issued at a discount of 10%, and (3) issued at a premium of 10% (redemption being in all these case at par).

Also show the entries which will be made if the Debentures are repayable at a premium of 5% but are issued (a) at par, and (b) at a discount of 10%.

In each case, show how the figures will appear in the Balance Sheet.

Solution 45

Question 46.      Pass necessary Journal Entries relating to the issue of debentures for the following:

(i) Issued Rs. 4,00,000, 9% debentures of Rs. 100 each at a premium of 8% redeemable at 10% premium.

(ii) Issued Rs. 6,00,000, 9% debentures of Rs. 100 each at a par, repayable at a premium of 10%.

(iii) Issued Rs. 10,00,000, 9% debentures of Rs. 100 each at a premium of 5% redeemable at par.

Solution 46

Question 47.      Journalise the following transactions:

(i) 400 debentures issued at Rs. 960 each, repayable at Rs. 1,000 each.

(ii) 400 debentures issued at Rs. 1,040 each, repayable at Rs. 1,000 each.

(iii) 400 debentures issued at Rs. 1,000 each, repayable at Rs. 1,060 each.

(iv) 400 debentures issued at Rs. 960 each, repayable at Rs. 1,060 each.

Solution 47

Question 48.      Give the journal entries at the time of issue of debentures in the following cases:

(i) Issued Rs. 5,00,000, Rs. 12% debentures at a par and redeemable at par after 5 year.

(ii) Issued Rs. 8,00,000, 11% debentures at 6% discount, redeemable at par after 4 years.

(iii) Issued Rs. 10,00,000, 14% debentures at 5% premium, redeemable at par after 4 years.

(iv) Issued Rs. 20,00,000, 12% debentures at par, redeemable at 5% premium after 3 years.

(v) Issued Rs. 12,00,000, 13% debentures at 4% discount, redeemable at 6% premium after 3 years.

Solution 48        

Question 49.      Journalise the following transactions:

(a) X Ltd. issues Rs. 2,00,000, 12% Debentures at a discount of 5% redeemable at par.

(b) Y Ltd. issues Rs. 5,00,000, 11% Debentures at a discount of 5% redeemable at a premium of 7%.

Solution 49         

Question 50.      (a) Journalise the following transactions at the time of issue of debentures: Nandan Ltd. Rs. 90,000, 12% debentures of Rs. 100 each as a discount of 5% redeemable at 110%.

(b) Winona Ltd. issued Rs. 80,000, 11% debentures of Rs. 100 each at a premium of 5% redeemable at premium of 10%.

Solution 50

Question 51.      A company issues the following debentures:

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

(b) 10,000, 12% debenture of Rs. 100 each at a discount of 5%, but redeemable at a premium of 5% after 5 years;

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

(d) 1,000, 14% debentures of Rs. 100 each issued to a supplier of machinery costing Rs. 95,000, the debentures are repayable after 5 years; and

 (e) 300, 13% debentures of Rs. 100 each as a collateral security to a bank who has advance a loan of Rs. 25,000 to the company for a period of 5 years.

Solution 51

Question 52.      Show by means of journal entries how you would record the following issues. Also show how they would appear in the respective Balance Sheets.

(i) A Ltd. issues Rs. 5,00,000, 13% Debentures at a discount of 8% redeemable at par.

(ii) B Ltd. issues Rs. 6,00,000, 12% Debentures at a discount of 6% redeemable at a premium of 7%.

(iii) C Ltd. purchased plant and machinery for Rs. 8,00,000 payable as to Rs. 2,30,000 in cash and the balance by an issue of 10% Debentures of Rs. 100 each at a discount of 5%.

(iv) D Ltd. issued 500, 11% Debentures of Rs. 100 each as a collateral security to a Bank who has advanced a loan of Rs. 45,000 to the Company for a period of 7 years.

(v) E Ltd. issued Rs. 2,20,000 Debentures to a creditor for Rs. 2,00,000 Capital Expenditure in satisfication of his claim. 

Solution 52

Question 53.      On 1-4-2018, Z Ltd. issued 5,00,000 8% Debentures of Rs. 100 each at a discount of 6% redeemable at a premium of 10% after four years. The amount was payable as follows:

On application Rs. 50 per Debenture

Balance on allotment.

Record the necessary journal entries for the issue of debentures in the books of the company.

Solution 53