Roshni Ltd. purchased machinery worth 1,98,000 from Prakash Ltd. The purchase consideration was paid by issue of 8% debentures of 100 each at 10% discount.
(i) Calculate the number of debentures issued.
(ii) Pass necessary journal entries for purchase of machinery and issue of debentures.
(ii) Pass necessary journal entries for purchase of machinery and issue of debentures.
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Solution and Explanation
(i) Number of Debentures Issued
Issue price of each debenture = 100 – 10% = ₹90
Purchase consideration = ₹1,98,000
Number of debentures issued = ₹1,98,000 / ₹90 = 2,200 debentures
(ii) Journal Entries
1. For purchase of machinery:
| Machinery A/c | Dr. | ₹1,98,000 |
| To Prakash Ltd. | ₹1,98,000 |
2. For issue of 8% debentures at 10% discount:
Face value = 2,200 × ₹100 = ₹2,20,000
Discount = 2,200 × ₹10 = ₹22,000
| Prakash Ltd. A/c | Dr. | ₹1,98,000 |
| Discount on Issue of Debentures A/c | Dr. | ₹22,000 |
| To 8% Debentures A/c | ₹2,20,000 |
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