Question

Pass necessary journal entries relating to issue of debentures and to write off discount/loss on issue of debentures in the books of Dhatu Ltd. in the following cases: 400, 11\% debentures of \rupee 1,000 each are issued at 10\% discount and redeemable at par. Balance in Securities Premium Account is \rupee 50,000. 500, 10\% debentures of \rupee 1,000 each are issued at 10\% discount and redeemable at a premium of 10\%. Balance in Securities Premium Account is \rupee 75,000.

Hint:

For debentures issued at a discount and redeemable at a premium, both the discount and premium must be accounted for in the Loss on Issue of Debentures Account.

Answer 1

Journal Entries: \begin{center} \begin{tabular}{|l|p{8cm}|r|r|} Date & Particulars & Debit (\rupee) & Credit (\rupee)
-- & Bank A/c & 3,60,000 & --
& Discount on Issue of Debentures A/c & 40,000 & --
& To 11\% Debentures A/c & -- & 4,00,000
& \textit{(400 debentures issued at 10\% discount and redeemable at par)} & &
-- & Loss on Issue of Debentures A/c & 40,000 & --
& To Discount on Issue of Debentures A/c & -- & 40,000
& \textit{(Loss on debentures transferred to Loss on Issue of Debentures Account)} & &
-- & Bank A/c & 4,50,000 & --
& Discount on Issue of Debentures A/c & 50,000 & --
& To 10\% Debentures A/c & -- & 5,00,000
& To Premium on Redemption A/c & -- & 50,000
& \textit{(500 debentures issued at 10\% discount and redeemable at 10\% premium)} & &
-- & Securities Premium A/c & 75,000 & --
& To Loss on Issue of Debentures A/c & -- & 75,000
& \textit{(Loss adjusted against Securities Premium Account)} & &
\end{tabular} \end{center}