Question

Mahesh Ltd. purchased Plant and Machinery from Ish Ltd. for \rupee 4,50,000. \rupee 50,000 was paid by cheque to Ish Ltd. and the balance by issuing 6\% debentures of \rupee 100 each at a discount of 20\%. Pass the necessary Journal Entries for the above transactions in the books of Mahesh Ltd.

Hint:

The number of debentures is calculated based on the issue price (face value - discount). Record the discount separately for amortization.

Answer 1

Step 1: Calculate the Number of Debentures Issued: \[ \text{Debenture Issue Price} = \rupee 100 - 20\% \text{of} \rupee 100 = \rupee 80 \] \[ \text{Balance Amount to be Paid} = \rupee 4,50,000 - \rupee 50,000 = \rupee 4,00,000 \] \[ \text{Number of Debentures Issued} = \frac{\text{Balance Amount}}{\text{Issue Price}} = \frac{\rupee 4,00,000}{\rupee 80} = 5,000 \text{ debentures} \] Journal Entries: \begin{center} \begin{tabular}{|c|c|c|c|} Date & Particulars & Debit (\rupee) & Credit (\rupee)
2023-03-31 & Plant and Machinery A/c & 4,50,000 &
& To Bank A/c & & 50,000
& To 6\% Debentures A/c & & 5,00,000
& To Discount on Issue of Debentures A/c & & 1,00,000
2023-03-31 & Discount on Issue of Debentures A/c & 1,00,000 &
& To Securities Premium A/c & & 1,00,000
\end{tabular} \end{center}