Q Ltd. issued 60,000 12% debentures of Rs. 100 each at a discount of 10%. The debentureholders have an option to convert their holdings into equity shares of Rs. 10 each at a premium of 20% at any time. J holds 1,000 debentures. Show journal entries for these cases: (i) When J exercises his option to convert debentures before the due date of redemption. (ii) When J exercises his option to convert debentures on the due date of redemption. (iii) When J does not exercise the option.
Dear Student,
(3) If he decided not to exercise this option then he has to wait for other alternatives offered by company.
Note:
Regards
Journal | |||||
Date | Particulars | L.F. | Debit Amount (Rs) |
Credit Amount (Rs) |
|
1. | If Debenture holder decides to convert Debentures into Equity before it becomes due: | ||||
12% Debentures A/c | Dr. | 1,00,000 | |||
To Loss on Issue of Debentures A/c | 10,000 | ||||
To Debentures’ holders A/c | 90,000 | ||||
(Debentures due for conversion) | |||||
Debentures’ holders A/c | Dr. | 90,000 | |||
To Equity Share Capital A/c | 75,000 | ||||
To Security Premium Reserve A/c | |||||
(Conversion of Debentures into Equity shares) | 15,000 | ||||
2. | If Debenture holder decides to convert Debentures into Equity At the time, it becomes due: | ||||
12% Debentures A/c | Dr. | 1,00,000 | |||
To Debentures’ holders A/c | 1,00,000 | ||||
(Debentures due for conversion) | |||||
Debentures’ holders A/c | Dr. | 1,00,000 | |||
To Equity Share Capital A/c | 83,333 | ||||
To Security Premium Reserve A/c | 16,667 | ||||
(Conversion of Debentures into Equity shares) | |||||
(3) If he decided not to exercise this option then he has to wait for other alternatives offered by company.
Note:
Regards