on 1st April 2019 bright Ltd. issued 400000, 6% debentures of 100 is at a discount of 5% redeemable after 3 years the amount per debenture was payable as on application 80 per debenture on allotment balance amount the debenture were fully subscribed and all money was really received pass necessary journal entries on issue of debentures.See answer
on 1st April 2019 bright Ltd issued 400000 6 debentures of 100 is at a discount of 5 redeemable after 3 years the amount per debenture was payable as on application 80 per debenture on allotment…
Question
Basic Answer
Step 1: Calculate the issue price per debenture.
The debentures are issued at a 5% discount. Therefore, the issue price is 100 – (5% of 100) = 100 – 5 = 95.
Step 2: Calculate the total amount received on application.
400,000 debentures were issued at ₹80 per debenture on application. Total application money received = 400,000 * ₹80 = ₹32,000,000.
Step 3: Calculate the total amount received on allotment.
The balance amount per debenture is 95 – 80 = ₹15. Total allotment money received = 400,000 * ₹15 = ₹6,000,000.
Step 4: Calculate the total discount on issue of debentures.
Total discount = 400,000 debentures * ₹5 discount per debenture = ₹2,000,000
Step 5: Journal Entries
Here are the necessary journal entries:
Date: April 1, 2019
Entry 1: Application Money Received
| Account Name | Debit (₹) | Credit (₹) |
|---|---|---|
| Bank Account | 32,000,000 | |
| Application Money Account | 32,000,000 | |
| Being application money received |
Entry 2: Allotment Money Received
| Account Name | Debit (₹) | Credit (₹) |
|---|---|---|
| Bank Account | 6,000,000 | |
| Allotment Money Account | 6,000,000 | |
| Being allotment money received |
Entry 3: Transferring Application and Allotment Money to Debentures Account
| Account Name | Debit (₹) | Credit (₹) |
|---|---|---|
| Application Money Account | 32,000,000 | |
| Allotment Money Account | 6,000,000 | |
| Discount on Issue of Debentures | 2,000,000 | |
| 6% Debentures Account | 38,000,000 | |
| Being application and allotment money transferred to debentures account |
Final Answer
The journal entries reflect the receipt of application and allotment money and the recording of the debentures issued at a discount. The discount is recorded as a separate expense.