Question

A. Ltd. issued 4,000, 9% Debentures of Rs 100 each on the following terms Rs 20 on Application; Rs 20 on Allotment; Rs 30 on First call; and Rs 30 on Final call. The public applied for 4,800 Debentures. Applications for 3,600 Debentures were accepted in full. Applications for 800 Debentures were allotted 400 Debentures and applications for 400 Debentures were rejected.

Answer 1

Given : A. Ltd. issued 4,000, 9% Debentures of Rs 100 each on the following terms Rs 20 on Application; Rs 20 on Allotment; Rs 30 on First call; and Rs 30 on Final call. The public applied for 4,800 Debentures. Applications for 3,600 .........

 

 

Concept :  

DEBENTURE :  

• Debenture is a written acknowledgement of debt taken by the company.
• Debentures can be issued with /without charge on the assets.
• Debentures may be issued at par, at premium or at discount.  
• Journal entries on issue of debenture are also the same as in case of issue of shares.  The difference is that instead of 'Share capital A/c , a debenture A/c'  is opened in the books of accounts and the rate of interest on debenture is prefixed on the issue of debentures.
• Debentures can be converted into equity shares.
• The debentures can be redeemed in lump sum or in installments.
• Debentures are shown under the head Non current liabilities and subhead long term borrowings.  

CALLS :  

When the whole amount on shares is not paid on application and allotment, the unpaid amount may be called by directors in one or more installments after allotment. Such installments are known as calls.

 

For a record of the above the journal entries are in the attachment below :  

 Hope this answer will help you..

Some more questions of this chapter :  

G.Ltd. issued 75,00,000, 6% Debenture of Rs 50 each at par payable Rs 15 on application and Rs 35 on allotment, redeemable at par after 7 years from the date of issue of debenture. Record necessary entries in the books of Company.

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X.Ltd. purchased a Machinery from Y for an agreed purchase consideration of Rs 4,40,000 to be satisfied by the issue of 12% debentures of Rs 100 each at a premium of Rs 10 per debenture. Journalise the transactions.

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