Question

Pass necessary journal entries for issue of debentures for the following transactions: 
(i) Suhavo Ltd. issued 10,000, 11% Debentures of ₹ 100 each at a discount of 10%, redeemable at a premium of 5%. 
(ii) Mudit Ltd. issued 20,000, 9% Debentures of ₹ 100 each at a premium of 5%, redeemable at a premium of 10%. 
(iii) Sudip Ltd. issued 30,000, 8% Debentures of ₹ 100 each at par, redeemable at a premium of 5%. 
 

Hint:

When issuing debentures at a discount or premium, carefully account for redemption premiums as they increase liability at the time of repayment.

Answer 1

1. Journal Entries for Suhavo Ltd.: \[ \begin{array}{|l|r|l|r|} \hline \textbf{Date} & \textbf{Particulars} & \textbf{Debit (₹)} & \textbf{Credit (₹)} \\ \hline -- & \text{Bank A/c Dr.} & 9,00,000 & -- \\ & \text{Discount on Issue of Debentures A/c Dr.} & 1,00,000 & -- \\ & \text{To 11\% Debentures A/c} & -- & 10,00,000 \\ & \text{To Premium on Redemption of Debentures A/c} & -- & 50,000 \\ & \text{(Being 10,000 debentures issued at 10\% discount and redeemable at 5\% premium)} & & \\ \hline \end{array} \] 2. Journal Entries for Mudit Ltd.: \[ \begin{array}{|l|r|l|r|} \hline \textbf{Date} & \textbf{Particulars} & \textbf{Debit (₹)} & \textbf{Credit (₹)} \\ \hline -- & \text{Bank A/c Dr.} & 21,00,000 & -- \\ & \text{To 9\% Debentures A/c} & -- & 20,00,000 \\ & \text{To Securities Premium A/c} & -- & 1,00,000 \\ & \text{To Premium on Redemption of Debentures A/c} & -- & 2,00,000 \\ & \text{(Being 20,000 debentures issued at 5\% premium and redeemable at 10\% premium)} & & \\ \hline \end{array} \] 3. Journal Entries for Sudip Ltd.: \[ \begin{array}{|l|r|l|r|} \hline \textbf{Date} & \textbf{Particulars} & \textbf{Debit (₹)} & \textbf{Credit (₹)} \\ \hline -- & \text{Bank A/c Dr.} & 30,00,000 & -- \\ & \text{To 8\% Debentures A/c} & -- & 30,00,000 \\ & \text{To Premium on Redemption of Debentures A/c} & -- & 1,50,000 \\ & \text{(Being 30,000 debentures issued at par and redeemable at 5\% premium)} & & \\ \hline \end{array} \]