Question

ABC Ltd. invited applications for issuing 30,000, 10% debentures of ₹100 each at a premium of ₹50 per debenture. The full amount was payable on application. Applications were received for 50,000 debentures. Applications for 10,000 debentures were rejected and the pro-rata application money was refunded. Debentures were allotted to the remaining applicants on pro-rata basis. Pass the necessary journal entries in the books of ABC Ltd.

Hint:

When debentures are issued at premium, the premium is credited to Securities Premium Account.

Answer 1

Issue Price of Debenture = ₹100 + ₹50 = ₹150 Total applications received = 50,000 debentures Debentures to be issued = 30,000 debentures \[ \text{Application Money Received} = 50,000 \times 150 = ₹75,00,000 \] (i) Receipt of Application Money Bank A/c Dr. ₹75,00,000
To Debenture Application A/c ₹75,00,000 
(ii) Transfer of Application Money for Debentures Allotted \[ 30,000 \times 150 = ₹45,00,000 \] Debenture Application A/c Dr. ₹45,00,000
To 10% Debentures A/c ₹30,00,000
To Securities Premium A/c ₹15,00,000 
(iii) Refund of Application Money (Rejected Applications) \[ 10,000 \times 150 = ₹15,00,000 \] Debenture Application A/c Dr. ₹15,00,000
To Bank A/c ₹15,00,000 
(iv) Refund of Excess Application Money (Pro-rata) \[ \text{Excess Money} = 75,00,000 - 45,00,000 - 15,00,000 = ₹15,00,000 \] Debenture Application A/c Dr. ₹15,00,000
To Bank A/c ₹15,00,000