Question

EF Ltd. invited applications for issuing 4000, 10% debentures of \u20b9 100 each at a premium of \u20b9 10 per debenture. The amount was payable as follows :
On application \hspace{1.5cm} -- \u20b9 40 per debenture
On allotment \hspace{2cm} -- \u20b9 70 per debenture (including premium) The debentures were fully subscribed and all money was duly received. Pass necessary journal entries for the above transactions in the books of EF Ltd.

Hint:

Break the debenture amount into face value and premium. Record money received and amounts due separately in the journal.

Answer 1

Working:

Total Debentures = 4,000

Face Value per Debenture = ₹100

Premium = ₹10

Total Issue Price = ₹110

Application Money = ₹40, Allotment (including premium) = ₹70

Journal Entries:

1. For receipt of application money:

Particulars	Dr (₹)	Cr (₹)
Bank A/c	1,60,000
To Debenture Application A/c		1,60,000
(Being application money received on 4,000 debentures @ ₹40 each)

 

2. For transfer of application money to Debenture A/c:

Particulars	Dr (₹)	Cr (₹)
Debenture Application A/c	1,60,000
To 10% Debentures A/c		1,60,000
(Being application money transferred to Debenture A/c)

 

3. For amount due on allotment (face value + premium):

Particulars	Dr (₹)	Cr (₹)
Debenture Allotment A/c	2,80,000
To 10% Debentures A/c		2,40,000
To Securities Premium A/c		40,000
(Being allotment due including premium @ ₹10 per debenture)

 

4. For receipt of allotment money:

Particulars	Dr (₹)	Cr (₹)
Bank A/c	2,80,000
To Debenture Allotment A/c		2,80,000
(Being allotment money received in full)

 

Final Answer: EF Ltd. passed four journal entries to record full subscription and premium received.