Double Entry Book Keeping Ts Grewal Vol. II 2019 for Class 12 Commerce Accountancy Chapter 9

Question 1:

Vishwas Ltd. issued 2,000; 9% Debentures of ₹ 100 each payable as follows:
₹ 25 on application; ₹ 25 on allotment and ₹ 50 on first and final call.
Applications were received for all the debentures along with the application money did allotment was made . Call money was also received on the due date.
Pass necessary Journal entries in the books of the company.

Answer:

Books of Vishwas Ltd.
Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
	Bank A/c	Dr.		50,000
	To 9% Debenture Application A/c				50,000
	(Debenture application money received for 2,000 debentures at Rs 25 each)

	9% Debenture Application A/c	Dr.		50,000
	To 9% Debenture A/c				50,000
	(Debenture application money transferred to 9% Debentures A/c)

	9% Debenture Allotment A/c	Dr.		50,000
	To 9% Debentures A/c				50,000
	(Debenture allotment money due on 2,000 Debentures at Rs 25 each)

	Bank A/c	Dr.		50,000
	To 9% Debenture Allotment A/c				50,000
	(Debenture allotment money received)

	9% Debenture First and Final Call A/c	Dr.		1,00,000
	To 9% Debentures A/c				1,00,000
	(Debenture first and final call money due on 2,000 debentures at Rs 50 each)

	Bank A/c	Dr.		1,00,000
	To 9% Debenture First and Final Call A/c				1,00,000
	(Debenture first and final call received)

Question 2:

A Ltd . issued 2,000; 9% Debentures of ₹ 100 each on the following terms:
₹20 on applications ;₹ 20 on allotment ; ₹ 30 on first call ; ₹ 30 on final call.
The public applied for 2,400 debentures. Applications for 1,800 debentures were accepted in full. Applications for 400 debentures were allotted 200 debentures and applications for 200 debentures were rejected . Pass necessary Journal entries .

Answer:

Books of A Ltd.
Journal
Date	Particular		L.F.	Debit Amount Rs	Credit Amount Rs
	Bank A/c	Dr.		48,000
	To 9% Debenture Application A/c				48,000
	(Debenture application money received for 2,400 debentures at Rs 20 each)

	9% Debenture Application A/c	Dr.		48,000
	To 9% Debentures A/c				40,000
	To 9% Debentures Allotment A/c				4,000
	To Bank A/c				4,000
	(Debenture application money transferred to 9% Debenture account for 2,000 Debenture, adjusted to Debenture Allotment account for 200 Debentures and money refunded for 200 debentures)

	9% Debenture Allotment A/c	Dr.		40,000
	To 9% Debentures A/c				40,000
	(Debenture allotment money due on 2,000 debentures at Rs 20 each)

	Bank A/c	Dr.		36,000
	To 9% Debentures Allotment A/c				36,000
	(Debenture allotment money received)

	Debenture First Call A/c	Dr.		60,000
	To 9% Debentures A/c				60,000
	(Debenture first call money due on 2,000 9% debenture at Rs 30 each)

	Bank A/c	Dr.		60,000
	To Debenture First Call A/c				60,000
	(Debenture first call money received)

	Debenture Final Call A/c	Dr.		60,000
	To 9% Debentures A/c				60,000
	(Debentures final call money due on 2,000 9% Debentures at Rs 30 each)

	Bank A/c	Dr.		60,000
	To Debenture Final Call A/c				60,000
	(Debenture final call received on 2,000 9% Debenture at Rs 30 each)

Question 3:

ABC Ltd. issued 40,000; 10% Debentures of ₹ 100 each at par for cash payable in full along with the application. Applications were received for 60,000 debentures . Debentures were allotted and excess application money was refunded. Pass Journal entries in the books of the company.

Answer:

Journal
Date	ABCParticulars		L.F.	Debit Amount (Rs)	Credit Amount (Rs)
	Bank A/c (60,000 $\times$ 100)	Dr.		60,00,000
	To Debenture Application and Allotment A/c				60,00,000
	(Received application money on 60,000 Debenture)

	Debenture Application and Allotment A/c	Dr.		60,00,000
	To 10% Debentures A/c (40,000 $\times$ 100)				40,00,000
	To Bank A/c				20,00,000
	(Application money transferred to Debentures A/c)

Question 4:

Narain Laxmi Ltd. invited applications for issuing 7,500; 12% Debentures of ₹ 100 each at a premium of ₹ 35 per debenture . The full amount was payable on application. Applications were received for 10,000 Debentures. Allotment was made to all the applications on pro rata.
Pass necessary Journal entries for the above transactions in the books of Narain Laxmi Ltd.

Answer:

In the Books of Narain Laxmi Ltd. Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
	Bank A/c (10,000 debentures × 135)	Dr.		13,50,000
	To Debenture Application and Allotment A/c				13,50,000
	(Application money received on 10,000 12% debenture)

	Debenture Application and Allotment A/c	Dr.		13,50,000
	To 12% Debentures A/c				7,50,000
	To Securities Premium Reserve A/c				2,62,500
	To Bank A/c				3,37,500
	(7,500; 12% Debentures of Rs 100 each issued at a premium of Rs 35 and excess money refunded)

Question 5:

Raj Ltd . issued 5,000; 8% Debentures of ₹ 100 each at a premium of 5% payable as follows:
₹ 10 on application ; ₹ 20 along with premium on allotment and balance on first and final call.
Pass necessary Journal entries.

Answer:

Books of Raj Ltd.
Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
	Bank A/c	Dr.		50,000
	To 8% Debenture Application A/c				50,000
	(Debenture application money received for 5,000 debentures at Rs 10 each)

	8% Debenture Application A/c	Dr.		50,000
	To 8% Debentures A/c				50,000
	(Debenture application money transferred to 8% Debentures A/c)

	8% Debenture Allotment A/c	Dr.		1,00,000
	To 8% Debentures A/c				75,000
	To Securities Premium A/c				25,000
	(Debenture allotment due on 5,000 8% Debentures at Rs 20 including premium of Rs 5)

	Bank A/c	Dr.		1,00,000
	To 8% Debentures Allotment A/c				1,00,000
	(Debenture allotment money received)

	8% Debentures First and Final Call A/c	Dr.		3,75,000
	To 8% Debenture A/c				3,75,000
	(Debenture first and final call due on 5,000 Debentures at Rs 75 each)

	Bank A/c	Dr.		3,75,000
	To 8% Debenture First and Final Call A/c				3,75,000
	(Debenture first and final call received)

Question 6:

Nipa Limited issued ₹ 10,00,000 Debentures of ₹ 100 each at a premium of 10% , payable 25% on application (including premium) and the balance on allotment . The debentures were applied for and the amount was dully received.
You are required to give Journal entries and prepare Cash Book.

Answer:

Face Value of Debenture = Rs 100

Premium (Rs 100 × 10%) = Rs 10

∴ Issue Price = Rs 110

Amount Payable as:

On Application (25%)	Rs 25 including premium of Rs 10 (i.e. Rs 10 + 15)
On Allotment (85%)	Rs 85 per debenture

Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
	Debenture Application A/c	Dr.		2,50,000
	To Debentures A/c				1,50,000
	To Securities Premium A/c				1,00,000
	(Debenture application money received for 10,000 debentures at Rs 25 including premium of Rs10 each transferred to debenture account)

	Debenture Allotment A/c	Dr.		8,50,000
	To Debentures A/c				8,50,000
	(Debentures allotment due on 10,000 Debentures at Rs 85 each)

Cash Book
Dr.							Cr.
Date	Particulars	L.F.	Bank Rs	Date	Particulars	L.F.	Bank Rs
	Debenture Application		2,50,000
	Debenture Allotment		8,50,000
					Balance c/d		11,00,000
			11,00,000				11,00,000

Question 7:

Alok Ltd. issued 7,000, 10% Debentures of ₹ 500 each at a premium of ₹ 50 per debenture redeemable at a premium of 10% after 5 years. According to the terms of issue, ₹ 200 was payable on application and balance on allotment.
Record necessary Journal entries at the time of issue of 10% Debentures.

Answer:

Journal
Date	Particulars		L.F.	Debit Amount (Rs)	Credit Amount (Rs)
	Bank A/c (7,000 $\times$ 200)	Dr.		14,00,000
	To Debenture Application A/c				14,00,000
	(Received application money on 7,000 debentures)

	Debenture Application A/c	Dr.		14,00,000
	To 10% Debentures A/c				14,00,000
	(Transfer of application money to Debentures A/c)

	Debenture Allotment A/c (7,000 $\times$ 350)	Dr.		24,50,000
	Loss on issue of Debentures A/c (7,000 $\times$ 50)	Dr.		3,50,000
	To 10% Debentures A/c (7,000 $\times$ 300)				21,00,000
	To Securities Premium Reserve A/c (7,000 $\times$ 50)				3,50,000
	To Premium on Redemption of Debentures A/c(7,000 $\times$ 50)				3,50,000
	(Allotment due on 7,000 Debentures at a premium of Rs 50 per debentures and redeemable at premium of 10%)

	Bank A/c	Dr.		24,50,000
	To Debenture Allotment A/c				24,50,000
	(Allotment money received)

Question 8:

Vijay Laxmi Ltd. invited applications for 10,000; 12% Debentures of ₹ 100 each at a premium of ₹ 70 per debenture .The full amount was payable on application.
Applications were received for 13,500 debentures. Applications for 3,500 debentures were rejected and application money was refunded . Debentures were allotted to the remaining applications .

Answer:

In the Books of Vijay Laxmi Ltd. Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
	Bank A/c	Dr.		22,95,000
	To Debenture Application and Allotment A/c				22,95,000
	(Application money received on 13,500 12% debenture)

	Debenture Application and Allotment A/c	Dr.		22,95,000
	To 12% Debentures A/c				10,00,000
	To Securities Premium Reserve A/c				7,00,000
	To Bank A/c				5,95,000
	(10,000; 12% Debentures issued at a premium of Rs 70 and excess money refunded)

Question 9:

Iron Products Ltd. issued 5,000; 9% Debentures of ₹ 100 each at a premium of ₹ 40 payable as follows;
(i) ₹ 40 , including premium of ₹ 10 on applications;
(ii) ₹ 45, including premium of ₹ 15 on allotment ; and
(iii) Balance as first and final call.
The issue was subscribed and allotment made. Calls were made and due amount was received .
Pass Journal entries .

Answer:

Journal
Date	Particulars		L.F.	Debit Amount (Rs)	Credit Amount (Rs)
	Bank A/c (5,000×40)	Dr.		2,00,000
	To Debenture Application A/c				2,00,000
	(Application money received)

	Debenture Application A/c	Dr.		2,00,000
	To 9% Debentures A/c (5,000×30)				1,50,000
	To Security Premium Reserve A/c (5,000×10)				50,000
	(Application money adjusted)

	Debenture Allotment A/c (5,000×45)	Dr.		2,25,000
	To 9% Debentures A/c (5,000×30)				1,50,000
	To Security Premium Reserve A/c (5,000×15)				75,000
	(Allotment money due)

	Bank A/c (5,000×45)	Dr.		2,25,000
	To Debenture Allotment A/c				2,25,000
	(Allotment money received)

	Debenture First and Final call A/c (5,000×55)	Dr.		2,75,000
	To 9% Debentures A/c (5,000×40)				2,00,000
	To Security Premium Reserve A/c (5,000×15)				75,000
	(First call money due)

	Bank A/c	Dr.		2,75,000
	To Debenture Final and Final call A/c				2,75,000
	(First Call money Received)

Question 10:

X Ltd . issued 12,000; 8% Debentures of ₹ 100 each at a discount of 5% payable as 25% on application;20% on allotment and balance after three months.
Pass Journal entries.

Answer:

Face Value of Debenture = Rs 100

Discount (Rs 100 × 5%) = Rs 5

∴ Issue Price = Rs 95

Amount Payable as:

On Application (25%)	Rs 25 per debenture
On Allotment (20%)	Rs 20 (25 – 5) per debenture
On First and Final Call (50%)	Rs 50 per debenture

Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
	Bank A/c	Dr.		3,00,000
	To 8% Debenture Application A/c				3,00,000
	(Application money received for 12,000 8% Debentures at Rs 25 each)

	8% Debenture Application A/c	Dr.		3,00,000
	To 8% Debentures A/c				3,00,000
	(Debenture application money transferred to 8% Debentures account)

	8% Debentures Allotment A/c	Dr.		2,40,000
	Discount on Issue of Debentures A/c	Dr.		60,000
	To 8% Debentures A/c				3,00,000
	(Allotment money due on 12,000 8% Debentures at Rs 20 each at discount of Rs 5)

	Bank A/c	Dr.		2,40,000
	To 8% Debenture Allotment A/c				2,40,000
	(Allotment money received)

	8% Debenture First and Final Call A/c	Dr.		6,00,000
	To 8% Debentures A/c				6,00,000
	(First and final call money due on 12,000 8% Debentures at Rs 50 each)

	Bank A/c	Dr.		6,00,000
	To 8% Debentures First and Final Call A/c				6,00,000
	(First and Final call money received)

Question 11:

Alka Ltd . issued 5,000, 10% Debentures of ₹ 1,000 each at a discount of 10% redeemable at a premium of 5% after 5 years . According to the terms of issue ₹ 500 was payable on application and the balance amount on allotment of debentures. Record necessary entries regarding issue of 10% Debentures.

Answer:

Journal
Date	Particulars		L.F.	Debit Amount (Rs)	Credit Amount (Rs)
	Bank A/c (5,000 $\times$ 500)	Dr.		25,00,000
	To Debenture Application A/c				25,00,000
	(Received application money on 5,000 debentures)

	Debenture Application A/c	Dr.		25,00,000
	To 10% Debentures A/c				25,00,000
	(Transfer of application money to Debentures A/c)

	Debenture Allotment A/c (5,000 $\times$ 400)	Dr.		20,00,000
	Discount on issue of Debentures A/c (5,000 $\times$ 100)			5,00,000
	Loss on issue of Debentures A/c (5,000 $\times$ 50)	Dr.		2,50,000
	To 10% Debentures A/c (5,000 $\times$ 500)				25,00,000
	To Premium on Redemption of Debentures A/c (5,000 $\times$ 50)				2,50,000
	(Allotment due on 5,000 Debentures at a discount of Rs 100 per debentures and redeemable at premium of 5%)

	Bank A/c	Dr.		20,00,000
	To Debenture Allotment A/c				20,00,000
	(Allotment money received)

Question 12:

Amrit Ltd . was promoted by Amrit and Bhaskar with an authorised capital of ₹ 10,00,000 divide into 1,00,000 shares of ₹ 10 each.
The company decided to issue 1,000,6% Debentures of ₹ 100 each to Amrit and Bhaskar each for their services in incorporating the company.
Pass journal entry.

Answer:

Journal
Date	Particulars		L.F.	Debit Amount (Rs)	Credit Amount (Rs)

	Incorporation Cost A/c (2,000 × 100)	Dr.		2,00,000
	To 6% Debentures A/c				2,00,000
	( Debentures issued to promoters)

Question 13:

Joy Ltd. company bought a Building for ₹ 9,00,000 and the consideration was paid by issuing 10% Debentures of the normal (face) value of ₹ 100 each at a discount of 10%.

Give Journal entries.

Answer:

Books of Joy Limited Journal
Date	Particulars		L.F.	Debit Amount (₹)	Credit Amount (₹)
	Building A/c	Dr.		9,00,000
	To Vendor A/c				9,00,000
	(Building purchased)

	Vendor A/c	Dr.		9,00,000
	Discount on Issue of Debentures A/c	Dr.		1,00,000
	To 10% Debentures A/c				10,00,000
	(Issued 10,000, 10% debentures at 10% discount)

Working Note:

Question 14:

Wye Ltd . purchased an established business for ₹ 2,00,000 payable as ₹ 65,000 by cheque and the balance by issuing 9% Debentures of ₹ 100 each at a discount of 10%.
Give journal entries in the books of Wye Ltd.

Answer:

Books of Wye Ltd.
Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
	Sundry Assets A/c	Dr.		2,00,000
	To Vendor A/c				2,00,000
	(Business purchased)

	Vendor A/c	Dr.		65,000
	To Bank A/c				65,000
	(Amount paid to Vendor in cash)

	Vendor A/c	Dr.		1,35,000
	Discount on Issue of Debentures A/c	Dr.		15,000
	To 9% Debentures A/c				1,50,000
	(Issued 1,500 debentures at 10% discount)

Working Note:

Question 15:

Newton Ltd. purchased a Machinery from B for ₹ 5,76,000 to be paid by the issue of 9% Debentures of ₹ 100 each at 4% discount. Journalise the trasactions.

Answer:

Books of Newton Ltd.
Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
	Machinery A/c	Dr.		5,76,000
	To B				5,76,000
	(Machinery purchased from B)

	B	Dr.		5,76,000
	Discount on Issue of Debenture A/c	Dr.		24,000
	To 9% Debenture A/c				6,00,000
	(Issued 6,000 debentures at 4% discount)

Working Note:

Question 16:

Reliance Ltd. purchased machinery costing ₹ 1,35,000 . It was agreed that the purchase consideration be paid by issuing 9% Debentures of ₹ 100 each . Assume debentures have been issued
(i) at par and
(ii)at a discount of 10%.
Give necessary journal entries.

Answer:

Case 1

Books of Reliance Ltd.
Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
	Machinery A/c	Dr.		1,35,000
	To Vendor A/c				1,35,000
	(Machinery Purchases)

	Vendor A/c	Dr.		1,35,000
	To 9% Debenture A/c				1,35,000
	(Issued 1,350 debentures at par)

Working Note:

Case 2

Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
	Machinery A/c	Dr.		1,35,000
	To Vendor A/c				1,35,000
	(Machinery purchased)

	Vendor A/c	Dr.		1,35,000
	Discount on Issue of Debentures A/c	Dr.		15,000
	To 9% Debenture A/c				1,50,000
	(Issued 1,500 debentures at 10% discount)

Working Note:

Question 17:

Deepak Ltd purchased furniture of ₹ 2,20,000 from M/s. Furniture Mart. 50% of the amount was paid to M/s. Furniture Mart by accepting a Bill of Exchanged and for the balance the company issued 9% Debenture of ₹ 100 each at a premium of 10% in favour of M/s. Furniture Mart.
Pass Journal entries in the books of Deepak Ltd.

Answer:

Books of Deepak Ltd.
Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
	Furniture A/c	Dr.		2,20,000
	To Furniture Mart				2,20,000
	(Furniture purchased from Furniture Mart)

	Furniture Mart	Dr.		1,10,000
	To Bills Payable A/c				1,10,000
	(Bill accepted from Furniture Mart against 50% payment)

	Furniture Mart	Dr.		1,10,000
	To 9% Debenture A/c				1,00,000
	To Securities Premium A/c				10,000
	(Issued 1,000 9% Debentures of Rs 100 each at a premium of 10% to Furniture Mart)

Working Note:

Question 18:

Bright Ltd. took over the assets of ₹ 6,60,000 and liabilities of ₹ 80,000 of Star Ltd. for an agreed purchase consideration of ₹ 6,00,000 payable 10% in cash and the balance by the issue of 12% Debentures of ₹ 100 each. Give necessary Journal entries in the books of Bright Ltd., assuming that:
Case (a): The debentures are issued at par.
Case (b): The debentures are issued at 20% premium.
Case (c): The debentures are issued at 10% discount.

Answer:

Books of Bright Ltd. Journal
Date	Particulars		L.F.	Debit Amount (₹)	Credit Amount (₹)
	Assets A/c	Dr.		6,60,000
	Goodwill A/c(Balancing Figure)	Dr.		20,000
	To Liabilities A/c				80,000
	To Star Ltd.				6,00,000
	(Purchase of business of Star Ltd.)
				60,000
	Star Ltd.	Dr.			60,000
	To Cash A/c
	(Payment made in cash)

(a)	Star Ltd.	Dr.		5,40,000
	To 12% Debentures A/c				5,40,000
	( Purchase consideration discharged by issue of 12% Debentures)

(b)	Star Ltd.	Dr.		5,40,000
	To 12% Debentures A/c				4,50,000
	To Security Premium Reserve A/c				90,000
	( Purchase consideration discharged by issue of 12% Debentures)

(c)	Star Ltd.	Dr.		5,40,000
	Discount on Issue of Debentures A/c	Dr.		60,000
	To 12% Debentures A/c				6,00,000
	( Purchase consideration discharged by issue of 12% Debentures)

Working Note:

$1) Number of Debentures to issued = \frac{5, 40, 000}{120} = 4, 500 Debentures$
$2) Number of Debentures to issued = \frac{5, 40, 000}{90} = 6, 000 Debentures$

Question 19:

Star Ltd. took over the assets of ₹ 6,60,000 and liabilities of ₹ 80,000 of Moon Ltd. for ₹ 6,00,000. Give necessary Journal entries in the books of Star Ltd. assuming that:
Case (a): The purchase consideration was payable 10% in cash and the balance in 5,400; 12% Debentures of ₹ 100 each.
Case (b): The purchase consideration was payable 10% in cash and the balance in 4,500; 12% Debentures of ₹ 100 each issued at 20% premium.

Answer:

Journal
Date	Particulars		L.F.	Debit Amount (₹)	Credit Amount (₹)
	Assets A/c	Dr.		6,60,000
	Goodwill A/c (Balancing Figure)	Dr.		20,000
	To Liabilities A/c				80,000
	To Moon Ltd.				6,00,000
	(Purchase of business took over)

a.	Moon Ltd.	Dr.		6,00,000
	To Cash A/c				60,000
	To 12% Debentures A/c				5,40,000
	(Purchase consideration discharged)

b.	Moon Ltd.	Dr.		6,00,000
	To Cash A/c				60,000
	To 12% Debentures A/c				4,50,000
	To Security Premium Reserve A/c				90,000
	( Purchase consideration discharged)

Question 20:

Romi Ltd. acquired assets of ₹ 20 lakhs and took over creditors of ₹ 2 lakhs from Kapil Enterprises.
Romi Ltd. issued 8% Debentures of ₹ 100 each at a discount of 25% as purchase consideration.
Record necessary journal entries in the books of Romi Ltd.

Answer:

Books of Romi Ltd.
Journal
Date	Particular		L.F.	Debit Amount Rs	Credit Amount Rs
	Assets A/c	Dr.		20,00,000
	To Creditors A/c				2,00,000
	To Kapil Enterprises				18,00,000
	(Asset purchased and Creditors took over from Kapil Enterprises)

	Kapil Enterprises A/c	Dr.		18,00,000
	To 8% Debentures A/c				14,40,000
	To Securities Premium A/c				3,60,000
	(Issued 14,400 8% Debentures of Rs 100 each at a premium of 25% to Kapil Enterprises)

Working Note:

Question 21:

Romi Ltd. acquired assets of ₹ 20 lakhs and took over creditors of ₹ 2 lakhs from Kapil Enterprises.
Romi Ltd. issued 8% Debentures of ₹ 100 each at a discount of 10% as purchase consideration.
Record necessary journal entries in the books of Romi Ltd.

Answer:

Books of Romi Ltd.
Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
	Assets A/c	Dr.		20,00,000
	To Creditors A/c				2,00,000
	To Kapil Enterprises				18,00,000
	(Assets purchased and Creditors took over from Kapil Enterprises)

	Kapil Enterprises	Dr.		18,00,000
	Discount on Issue of Debentures A/c	Dr.		2,00,000
	To 8% Debentures A/c				20,00,000
	(Issued 20,000 8% Debentures of Rs 100 each at discount of 10% to Kapil Enterprises)

Working Note:

Question 22:

Exe Ltd. purchased the assets of the book value ₹4,00,000 and took over the liabilities of ₹ 50,000 from Mohan Bros.It was agreed that the purchase consideration ,settled at ₹3,80,000 be paid by issuing debentures of ₹ 100 each.
Pass journal entries if debenture are issued:
(a) at par
(b) at a discount of 10% and
(c) at a premium of 10%.
It was agreed that any fraction of debentures be paid in cash.

Answer:

Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
	Assets A/c	Dr.		4,00,000
	Goodwill A/c (balancing figure)	Dr.		30,000
	To Liabilities A/c				50,000
	To Mohan Bros. A/c				3,80,000
	(Asset and liabilities purchased from Mohan Bros.)

Case 1 When Debentures are issued at Par

Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
	Mohan Bros.	Dr.		3,80,000
	To Debenture A/c				3,80,000
	(Issued 3,800 debentures at par)

Working Note:

Case 2 When Debentures are issued at 10% discount

Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
	Mohan Bros.	Dr.		3,80,000
	Discount on issue of Debenture A/c	Dr.		42,220
	To Debenture A/c				4,22,200
	To Bank A/c				20
	(Issued 4,222 Debentures of Rs 100 each at 10% discount to Mohan Bros. and fraction of debentures is paid in cash)

Working Note:

Case 3 When Debentures are issued at 10% premium

Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
	Mohan Bros.	Dr.		3,80,000
	To Debenture A/c				3,45,400
	To Securities Premium A/c				34,540
	To Bank A/c				60
	(Issued 3,454 Debentures of Rs 100 each at 10% premium to Mohan Bros. and fraction of debentures is paid in cash)

Working Note:

Question 23:

R Ltd. purchased the assets of S Ltd. for ₹5,00,000. It also agreed to take over the liabilities of S Ltd. amounted to ₹ 2,00,000 for a purchase consideration of ₹2,80,000 . The payment of S Ltd. was made by issue of 9% Debentures of ₹ 100 each at par.
Pass necessary journal entries in the books of R Ltd.

Answer:

Books of R Ltd.
Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
	Assets A/c	Dr.		5,00,000
	To Liabilities A/c				2,00,000
	To S Ltd.				2,80,000
	To Capital Reserve A/c (balancing figure)				20,000
	(Asset purchased and liabilities took over from S Ltd.)

	S Ltd.	Dr.		2,80,000
	To 9% Debentures A/c				2,80,000
	(Issued 2,800 9% Debentures of Rs 100 each)

Working Note:

Question 24:

Green Ltd. purchased the assets of Strong Ltd. for ₹ 40,00,000 and took over liabilities of 7,00,000 at an agreed value of ₹ 32,40,000. Payment was made by issuing 10% Debentures of 100 each at a discount of 10%. Pass the necessary Journal entries in the books of Green Ltd.

Answer:

In the books of Green Ltd. Journal
Date	Particulars		L.F.	Debit Amount (₹)	Credit Amount (₹)
	Sundry Assets A/c	Dr.		40,00,000
	To Sundry Liabilities A/c				7,00,000
	To Strong Ltd.				32,40,000
	To Capital Reserve A/c				60,000
	(Being the purchase of business of Strong Ltd.)

	Strong Ltd. A/c	Dr.		32,40,000
	Discount on Issue of Debentures A/c (36,000×10)	Dr.		3,60,000
	To 10% Debentures A/c				36,00,000
	(Being 36,000, 10% debentures issued as purchase consideration)

Working Notes:
Number of Debentures issued= (32,40,000/90) = 36,000 debentures

Question 25:

Wellbeing Ltd. took over assets of ₹ 9,80,000 and liabilities of ₹ 40,000 of HDR Ltd. at an agreed value of ₹ 9,00,000. Wellbeing Ltd. paid to HDR Ltd. by issue of 9% Debentures of ₹ 100 each at a premium of 20%. Pass necessary Journal entries to record the above transactions in the books of Wellbeing Ltd.

Answer:

In the books of Wellbeing Ltd. Journal
Date	Particulars		L.F.	Debit Amount (₹)	Credit Amount (₹)
	Sundry Assets A/c	Dr.		9,80,000
	To Sundry Liabilities A/c				40,000
	To HDR Ltd.				9,00,000
	To Capital Reserve A/c				40,000
	(Being the purchase of business of HDR Ltd.)

	HDR Ltd. A/c	Dr.		9,00,000
	To 9% Debentures A/c (7,500 × 100)				7,50,000
	To Securities Premium Reserve A/c (7,500 × 20)				1,50,000
	(Being 36,000, 10% debentures issued as purchase consideration)

Working Notes:
Number of Debentures issued = (9,00,000/120) = 7,500 debentures

Question 26:

Grown Ltd. issued 500, 10% Debentures of ₹ 1,000 each credited as fully paid-up to the promoters for their services to incorporate the company. It also issued 100, 10% Debentures of ₹ 1,000 each credited as fully paid-up to the underwriters towards their commission. Pass the Journal entries.

Answer:

In the books of Grown Ltd. Journal
Date	Particulars		L.F.	Debit Amount (₹)	Credit Amount (₹)
	Incorporation Expenses A/c	Dr.		5,00,000
	To Promoters A/c				5,00,000
	(Being amount due to promoters for their services)

	Promoters A/c	Dr.		5,00,000
	To 10% Debentures A/c (500 × 1,000)				5,00,000
	(Being 500, 10% debentures issued as purchase consideration)

	Underwriting Commission A/c	Dr.		1,00,000
	To Underwriters A/c				1,00,000
	(Being amount due to underwriters for their services)

	Underwriters A/c	Dr.		1,00,000
	To 10% Debentures A/c (100 × 1,000)				1,00,000
	(Being 100, 10% debentures issued as purchase consideration)

	Statement of Profit and Loss A/c	Dr.		6,00,000
	To Incorporation Expenses A/c				5,00,000
	To Underwriting Commission A/c				1,00,000
	(Being expenses transferred to statement of profit and loss at the end of year)

Question 27:

'Sangam Woollens Ltd.', Ludhiana, are the manufacturers and exporters of woollen garments. The company decided to distribute free of cost woollen garments to 10 villages of Lahaul and Spiti District of Himachal Pradesh. The company also decided to employ 50 young persons from these villages in its newly established factory. The company issued 40,000 Equity Shares of ₹ 10 each and 1,000, 9% Debentures of ₹ 100 each to the vendor for the purchase of machinery of ₹ 5,00,000. Pass necessary Journal entries.

Answer:

In the books of Sangam Woollens Ltd. Journal
Date	Particulars		L.F.	Debit Amount (₹)	Credit Amount (₹)
	Machinery A/c	Dr.		5,00,000
	To Vendor A/c				5,00,000
	(Being machinery purchased from a Vendor)

	Vendor A/c	Dr.		5,00,000
	To Equity Share Capital A/c (40,000×10)				4,00,000
	To 9% Debentures A/c (1,000×100)				1,00,000
	(Being equity shares and 9% Debentures issued as purchase consideration)

Question 28:

Best Barcode Ltd. took a loan of ₹ 5,00,000 from a bank giving ₹ 6,00,000; 9% Debentures as collateral security. Pass journal entries regarding issue of debentures , if any, and show this loan in the Balance Sheet of the company.

Answer:

Best Barcode Ltd.
Balance Sheet
Particulars	Note No.	Amount (Rs)
I. Equity and Liabilities
1. Shareholders’ Funds
2. Non-Current Liabilities
a. Long-Term Borrowings	1	5,00,000
3. Current Liabilities
Total		5,00,000

II. Assets
1. Non-Current Assets
2. Current Assets
a. Cash and Cash Equivalents	2	5,00,000
Total		5,00,000

NOTES TO ACCOUNTS

Note No.	Particulars	Amount (Rs)

1	Long-Term Borrowings
	Loan (Secured by issue of 9% Debentures of Rs 6,00,000 as Collateral Security)	5,00,000

2	Cash and Cash Equivalents
	Cash at Bank	5,00,000

Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
	Bank A/c	Dr.		5,00,000
	To Loan A/c				5,00,000
	(Loan taken against issuing 9% Debentures as collateral Security)

Alternative Method:

Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
	Bank A/c	Dr.		5,00,000
	To Loan A/c				5,00,000
	(Loan taken against issuing 9% debentures as collateral Security)

	Debenture Suspense A/c	Dr.		6,00,000
	To 9% Debentures A/c				6,00,000
	(Issued 9% Debentures of Rs 6,00,000 as collateral security)

Posting in the Company's Balance Sheet

Best Barcode Ltd.
Balance Sheet
Particulars	Note No.	Amount (Rs)
I. Equity and Liabilities
1. Shareholders’ Funds
2. Non-Current Liabilities
a. Long-Term Borrowings	1	5,00,000
3. Current Liabilities
Total		5,00,000

II. Assets
1. Non-Current Assets
2. Current Assets
a. Cash and Cash Equivalents	2	5,00,000
Total		5,00,000

NOTES TO ACCOUNTS

Note No.	Particulars		Amount (Rs)

1	Long-Term Borrowings
	Secured:
	Loan (Secured by issue of 9% Debentures of Rs 6,00,000 as Collateral Security)		5,00,000
	9% Debentures (Issued as Collateral Security to Bank against loan)	6,00,000
	Less: Debenture Suspense Account	6,00,000	-
			5,00,000

2	Cash and Cash Equivalents
	Cash at Bank		5,00,000

Question 29:

A company took a loan of ₹ 4,00,000 from Bandhan Bank Ltd. and issued 8% Debentures of ₹ 4,00,000 as a collateral security.

Answer:

When Debentures Issued as Collateral Security are shown separately

Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
	Bank A/c	Dr.		4,00,000
	To Loan from Bandhan Bank Ltd.				4,00,000
	(Loan taken against issuing 8% Debentures as collateral security)

	Debenture Suspense A/c	Dr.		4,00,000
	To 8% Debenture A/c				4,00,000
	(Debentures issued as collateral security)

Posting in the Company's Balance Sheet (When Debentures Issued as Collateral Security are shown separately)

Balance Sheet
Particulars	Note No.	Amount (Rs)
I Equity and Liabilities
1.Shareholders’ Funds
2.Non-Current Liabilities
a. Long-Term Borrowings	1	4,00,000
3.Current Liabilities
Total		4,00,000

II Assets
1. Non-Current Assets
2. Current Assets

Double Entry Book Keeping Ts Grewal Vol. II 2019 for Class 12 Commerce Accountancy Chapter 9 - Issue Of Debentures

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