Question

Ridyum Limited issued 5,000, 9\% debentures of Rs 500 each at a premium of 10\%. The amount was payable as follows:
On Application - Rs 200 per debenture
On Allotment – Balance (including premium)
The debentures were fully subscribed and all amounts were duly received. Pass the necessary journal entries for issue of debentures in the books of Ridyum Limited.

Hint:

When debentures are issued at a premium payable in installments: 1. Receive application money (Bank Dr, Debenture Application Cr). 2. Transfer application money to Debentures A/c (Debenture Application Dr, Debentures Cr). 3. Make allotment due entry: Debenture Allotment Dr (Total Allotment Amount), To Debentures Cr (Face Value part), To Securities Premium Cr (Premium part). 4. Receive allotment money (Bank Dr, Debenture Allotment Cr).

Answer 1

Working Notes:
1. Calculation of Premium and Allotment Amount:
Face Value per debenture = Rs 500
Premium per debenture = 10% of Rs 500 = Rs 50
Issue Price per debenture = Face Value + Premium = Rs 500 + Rs 50 = Rs 550
Amount received on Application = Rs 200 per debenture
Amount due on Allotment = Issue Price - Application Amount
Amount due on Allotment = Rs 550 - Rs 200 = Rs 350 per debenture
Breakdown of Allotment Amount: Towards Capital = Face Value - Application Amount = Rs 500 - Rs 200 = Rs 300. Towards Premium = Rs 50. Total = Rs 350.
2. Total Amounts:
Number of Debentures = 5,000
Total Application Money Received = 5,000 \( \times \) Rs 200 = Rs 10,00,000
Total Allotment Money Due/Received = 5,000 \( \times \) Rs 350 = Rs 17,50,000
Total Face Value (Debentures) = 5,000 \( \times \) Rs 500 = Rs 25,00,000
Total Securities Premium = 5,000 \( \times \) Rs 50 = Rs 2,50,000
Journal Entries in the books of Ridyum Limited
\begin{longtable}{|p{1.5cm}|p{8cm}|r|r|} \hline Date & Particulars & Dr. (Rs) & Cr. (Rs)
\hline \endfirsthead \hline \endfoot \hline \endlastfoot (i) & Bank A/c \hspace{5.3cm} Dr. & 10,00,000 &
& \indent To Debenture Application A/c & & 10,00,000
& \textit{(Being application money received for 5,000 debentures @ Rs 200 each)} & &
\hline (ii) & Debenture Application A/c \hspace{2.5cm} Dr. & 10,00,000 &
& \indent To 9\% Debentures A/c & & 10,00,000
& \textit{(Being application money transferred to Debentures Account on allotment)} & &
\hline (iii) & Debenture Allotment A/c \hspace{2.8cm} Dr. & 17,50,000 &
& \indent To 9\% Debentures A/c & & 15,00,000
& \indent To Securities Premium A/c & & 2,50,000
& \textit{(Being allotment money due on 5,000 debentures @ Rs 350 each, including premium @ Rs 50 each)} & &
\hline (iv) & Bank A/c \hspace{5.3cm} Dr. & 17,50,000 &
& \indent To Debenture Allotment A/c & & 17,50,000
& \textit{(Being allotment money received)} & &
\hline \end{longtable}