Question

Pass Journal entries relating to the issue of debentures in the books of Novex Ltd. in each of the following cases:

1. Issued 30,000, 10% Debentures of Rs.100 each at a premium of 10%, redeemable at par.
2. Issued 4,000, 10% Debentures of Rs.100 each at a premium of 15%, redeemable at a premium of 10%.
3. Issued 5,000, 10% Debentures of Rs.100 each at a discount of 5%, redeemable at a premium of 10%.

Hint:

For debenture issues, adjust for premiums, discounts, and redemption terms as per the problem requirements. Any loss on redemption should be charged to the appropriate account.

Answer 1

Journal Entries: \[ \begin{array}{|l|c|c|} \hline \textbf{Particulars} & \textbf{Dr. Amount (Rs.)} & \textbf{Cr. Amount (Rs.)} \\ \hline \textbf{Case (i):} & & \\ \text{Bank A/c Dr.} & 33,00,000 & \\ \text{To 10\% Debentures A/c} & & 30,00,000 \\ \text{To Securities Premium A/c} & & 3,00,000 \\ \hline \textbf{Case (ii):} & & \\ \text{Bank A/c Dr.} & 4,60,000 & \\ \text{Loss on Redemption A/c Dr.} & 40,000 & \\ \text{To 10\% Debentures A/c} & & 4,00,000 \\ \text{To Securities Premium A/c} & & 60,000 \\ \hline \textbf{Case (iii):} & & \\ \text{Bank A/c Dr.} & 4,75,000 & \\ \text{Discount on Issue A/c Dr.} & 25,000 & \\ \text{Loss on Redemption A/c Dr.} & 50,000 & \\ \text{To 10\% Debentures A/c} & & 5,00,000 \\ \text{To Securities Premium A/c} & & 50,000 \\ \hline \end{array} \]