Question

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 1

The necessary Journal entries in the books of the company are calculated and prepared below:

Explanation:

Given,

Reliance Ltd. purchased machinery costing ₹ 1,35,000.

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%.

(i) Calculation of Number of Debentures Issued

Number of Debentures issued

$=\frac{\text { Purchase Consideration }}{\text { Issue Price }}$

$=\frac{1,35,000}{100}=1,350 \text { debentures }$

(ii) Calculation of Number of Debentures Issued

Number of Debentures issued

$=\frac{\text { Purchase Consideration }}{\text { Issue Price }}$

$=\frac{1,35,000}{90}=1,500 \text { debentures }$

The necessary Journal entries in the books of the company are calculated and prepared below: