Issue and Redemption of Debentures

Amrit Company Limited purchased assets of the value of Rs. 2,20,000 from another company and agreed to make the payment of purchase consideration by issuing 2,000, 10% debentures of Rs. 100 each at a premium of 10%. Record necessary journal entries.

A company purchased assets of the value of Rs.1,90,000 from another company and agreed to make the payment of purchase consideration by issuing 2,000, 10% debentures of Rs.100 each at a discount of 5%. Record necessary journal entries.

Rose Bond Limited purchased a business for Rs. 22,00,000. Purchase Price was paid by 6% debentures. Debentures of Rs. 20,00,000 were issued at a premium of 10% for the purpose. Record necessary journal entries.

Nikhil and Ashwin Limited bought business of Agarwal Limited consisting sundry assets of Rs. 3,60,000, sundry creditors Rs.1,00,000 for a consideration of Rs. 3,07,200. It issued 14% debentures of Rs. 100 each fully paid at a discount of 4% in satisfaction of purchase consideration. Record necessary journal entries.

Raghuveer Limited issued Rs. 10,00,000, 8% debentures as follows to: Rs. 1. Sundry Subscribers for Cash at 90% 5,50,000 2. Vendor of Machinery for Rs. 2,00,000 2,00,000 in satisfaction of his claim 3. Bankers as Collateral Security for a bank loan 2,50,000 worth Rs. 20,00,000 for which principal security is Business Premises worth Rs. 22,50,000. The issue (1) and (2) are redeemable at the end of 10 years at par. State how the debenture will be dealt with while preparing the balance sheet of a company.

Hassan Limited took a loan of Rs. 30,00,000 from a bank against primary security worth Rs. 40,00,000 and issued 4,000, 6% debentures of Rs. 100 each as a collateral security. The company again after one year took a loan of Rs. 50,00,000 from bank against Plant as primary security and deposited 6,000, 6% debentures of Rs. 100 each as collateral security. Record necessary journal entries and prepare balance sheet of the company.

Meghnath Limited took a loan of Rs. 1,20,000 from a bank and deposited 1,400, 8% debentures of Rs. 100 each as collateral security along with primary security worth Rs. 2 lakh. Company again took a loan of Rs. 80,000 after two months from a bank and deposited 1,000, 8% debentures of Rs. 100 each as collateral security. Record necessary journal entries and prepare balance sheet of the company.

Nena Limited issued 50,000, 10% debentures of Rs. 100 each on the basis of the following conditions: a. Debentures issued at par and redeemable at par. b. Debentures issued at discount @ 5% and redeemable at par. c. Debentures issued at premium @ 10% and redeemable at par. d. Debentures issued at par and redeemable at premium @ 10%. e. Debentures issued at discount of 5% and redeemable at a premium of10%. f. Debentures issued at premium of 6% and redeemable at a premium of 4%. Record necessary journal entries in the above mentioned cases at the time of issue and redemption of debentures.

Record necessary journal entries in each of the following cases: a. 27,000, 7% debentures of Rs. 100 each issued at par, redeemable at par. b. 25,000, 7% debentures of Rs. 100 each issued at par redeemable at 4% premium. c. 20,000, 7% debentures of Rs. 100 each issued at 5% discount and redeemable at par. d. 30,000, 7% debentures of Rs. 100 each issued at 5% discount and redeemable at 2½ % premium. e. 35,000, 7% debentures of Rs. 100 each issued at 4% premium and redeemable at premium of 5%.

X Ltd. issued 2,000, 10% debentures of Rs. 100 each at a discount of 8% on April 01, 2019 which are redeemable. It has balance in Securities Premium Reserve of Rs. 30,000. Calculate the amount to be written-off from securities Premium Reserve.

Z Ltd. issued 15,00,000, 10% debentures of Rs. 50 each at premium of 10% payable as Rs. 20 on application and balance on allotment. Debentures are redeemable at par after 6 years. All the amount due on allotment was called and duly received. Record necessary entries when premium money is included: (i) in application money (ii) in allotment money

Z Ltd. issued 5,000,10% debentures of Rs. 100 each at a discount of 10% on 1.4.2019. The debentures are to be redeemed every year by draw of lots – 1,000 debentures to be redeemed every year starting on 31.03.2021. Record the necessary journal entries including the payment of interest and writing off the discount on issue of debentures. The interest is payable on September 30 and March 31. Z Ltd. closes its books of accounts on March 31 every year.

On 1.4.2019, Fast Computers Ltd. issued 20,00,000, 6% debentures of Rs. 100 each at a discount of 4%, redeemable at a premium of 5% after three years. The amount was payable as follows: On application Rs. 50 per debenture, Balance on allotment, Record the necessary journal entries for issue of debentures.

D Ltd. purchased machinery worth Rs. 2,00,000 from E Ltd. on 1.4.2016. Rs. 50,000 were paid immediately and the balance was paid by issue of Rs. 1,60,000, 12% Debentures in D Ltd. Record the necessary journal entries for recording the transactions in the books of D Ltd.

Debenture is a part of owned capital.

The payment of interest on debentures is a charge on the profits of the company.

The debentures cannot be issued at a discount of more than 10% of the face value.

Redeemable debentures are those debentures, which are payable on the expiry of the specific period.

Perpetual debentures are also known as irredeemable debentures.

Debentures cannot be converted into shares.