Question

Ajanta Ltd. purchased machinery worth Rs 36,00,000 from Sujata Ltd. Ajanta Ltd. paid half the amount to Sujata Ltd. through a bank draft and the balance by issuing 8 debentures of Rs 100 each at a discount of 10.
Pass the necessary journal entries in the books of Ajanta Ltd. for the above transactions.

Hint:

When settling purchase consideration by issuing debentures at a discount: 1. Calculate the issue price per debenture (Face Value - Discount). 2. Determine the number of debentures to be issued (Amount Due / Issue Price). 3. In the journal entry, Debit the Vendor with the amount settled, Debit 'Discount on Issue of Debentures' with the total discount, and Credit 'Debentures A/c' with the total face value.

Answer 1

Workings: % Option (A) Purchase Consideration (PC): PC for machinery = Rs 36,00,000. % Option (B) Payment Details: \begin{itemize} % Option (C) Paid by Bank Draft = \( \frac{1}{2} \times 36,00,000 = Rs 18,00,000 \). % Option (D) Balance to be paid by issuing debentures = \( 36,00,000 - 18,00,000 = Rs 18,00,000 \). \end{itemize} % Option (E) Calculate Number of Debentures Issued: \begin{itemize} % Option (F) Issue Price per Debenture = Face Value - Discount = Rs 100 - (10 of Rs 100) = 100 - 10 = Rs 90. % Option (G) Number of Debentures = \(\frac{\text{Amount Due}}{\text{Issue Price per Debenture}}\) = \(\frac{18,00,000}{90}\) = 20,000 debentures. \end{itemize} % Option (H) Calculate Amounts for Debenture Issue Entry: \begin{itemize} % Option (I) Face Value (to 8% Debentures A/c) = 20,000 \( \times \) Rs 100 = Rs 20,00,000. % Option (J) Discount on Issue (to Discount on Issue A/c) = 20,000 \( \times \) Rs 10 = Rs 2,00,000. % Option (K) Amount credited to Vendor settled by debentures = 20,000 \( \times \) Rs 90 = Rs 18,00,000 (Matches balance due). Alternatively, Vendor A/c Dr. with balance due 18,00,000. \end{itemize} Journal Entries in the books of Ajanta Ltd.:
\vspace{0.2cm} \begin{tabularx}{\textwidth}{X r r} \toprule Particulars & Dr. (Rs) & Cr. (Rs)
\midrule \multicolumn{3}{l}{\textit{(i) For purchase of machinery:}}
Machinery A/c \dotfill & 36,00,000 &
\quad To Sujata Ltd. (Vendor) A/c \dotfill & & 36,00,000
\textit{(Being machinery purchased from Sujata Ltd.)} & &
\midrule \multicolumn{3}{l}{\textit{(ii) For part payment by bank draft:}}
Sujata Ltd. (Vendor) A/c \dotfill & 18,00,000 &
\quad To Bank A/c \dotfill & & 18,00,000
\textit{(Being half payment made by bank draft)} & &
\midrule \multicolumn{3}{l}{\textit{(iii) For issue of debentures for the balance amount:}}
Sujata Ltd. (Vendor) A/c \dotfill & 18,00,000 &
Discount on Issue of Debentures A/c \dotfill & 2,00,000 &
\quad To 8 Debentures A/c \dotfill & & 20,00,000
\textit{(Being 20,000, 8 Debentures of Rs 100 each issued at a discount of 10 for balance PC)} & &
\bottomrule \end{tabularx} \vspace{0.2cm}