ISSUE OF DEBENTURES

1.Venus 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.

2. JS 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 and allotment was
made. Call money was also received on the due date. Pass necessary Journal entries in the books of the
company.

3. Dogra Ltd. issued 2,000; 9% Debentures of 1₹00 each on the following terms:

₹20 on application; ₹20 on allotment; ₹30 on first call; ₹30 on second and final call.

Application were received for 2400 debentures. Application for 1,800 debentures were accepted in full.
Application for 400 debentures were allotted 200 debentures and application for 200 debentures were
rejected.

Pass necessary journal entries.

4. Super Seals Ltd issued 10,000, 8% Debentures of ₹ 100 each at par for subscription payable ₹40 on
application ,₹30 on allotment and balance as first and final call. Debentures issued were applied
allotment was made. First and Final Call is yet to be made .

You are required to pass the necessary Journal entries.

5. 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 Issue was subscribed and allotment
was made.

Pass necessary Joumal entries for the above transactions in the books of Narain Laxmi Ltd.

6. Nipa Limited issued 10.000 Debentures of t 100 each at a premium of 10%, payable 30% of nominal
(face) value on application (including premium) and the balance on allotment. The debentures were
applied for and the amount was duly received

You are required to give Journal entries and prepare Cash Book

7. Raj Ltd. issued 5,000, 8% Debentures of ₹ 100 each at a premium of 5% payable as follows:

₹10 on application; ₹20 plus premium on allotment and balance on first and final call.

Pass necessary Journal entries.

8.Grand Hospitality ltd. issued 10,000, 7% Debentures of ₹100 each at premium of ₹20 per debenture.
Issue price was payable as follows:

₹40 on application, ₹50 (including premium) on allotment and balance on first and final call.
It received ₹ 4,00,000 as application money. On allotment due amount was received First and final call is
yet to be made You are required to pass the necessary Journal entries.

9. Iron Products Ltd issued 5,000; 9% Debentures of ₹ 100 each at a premium of ₹40 payable as follows

(1) ₹40, including premium of ₹10 on application;

(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

10. Pure Products Ltd. issued 30,000, 8% Debentures of 100 each at 10% premium for subscription. The
issue price was payable ₹40 on application, 4₹0 (including premium) on allotment and balance on first
and final call it received application money amounting to ₹10,80,000. Allotment was made and
allotment money was received. First and final call is yet to be made.

You are required to pass the necessary Journal entries.

11. Kati Ltd. issued 8,000, 9% Debentures of 100 each at a discount of 10%. The full amount was payable
on application. Applications were received for 9,000 debentures and allotment was made on pro rata
bass Pass the necessary Journal entries for the above transactions in the books of Kati Ltd.

12. Linux 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

13. Alka Ltd issued 5,000, 10% Debentures of ₹ 1,000 each at a discount of 10% redeemable after 5
years, According to the terms of issue, ₹500 (after discount of ₹50) was payable on application and the
balance amount on allotment of debentures. Record necessary entries regarding issue of 10%
Debentures

14. The Decor Ltd issued 20,000, 6% Debentures of ₹ 100 each at 10% discount payable ₹30 on
application, ₹40 (after discount) and balance as first and firial call. Debentures were subscribed and
allotment was made Amount due on allotment was made and received. First and final call is yet to be
made. You are required to pass the necessary Journal entries.

Issue of Debentures for Consideration other than Cash

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

Give Journal entries.

16. Amrit Ltd. issued 1,000, 6% Debentures of 100 each to Amit and Bhaskar (Promoters) each for their
services in incorporating the company. Pass Journal entry.

[Ans.: Dr. Incorporation Expenses or Preliminary Expenses A/c and Cr. 6% Debentures A/c by 2,00,000)
17. B Ltd. issued 9% Debentures of 100 each at a premium of 20% to Vendors for purchase of plant
costing ₹6,00,000. Pass the necessary Journal entry for the payment made to vendors.

18. Ananya 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
Ananya Ltd.

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

20. Romi Ltd. acquired assets of ₹20 lakh and took over creditors of ₹2 lakh 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

21. Exe Ltd. purchased 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 debentures 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.

[Ans: Goodwill ₹30,000; Case (a) 3,800 Debentures of ₹100 each: Case (b) 4,222 Debentures of 1₹00
each and paid cash ₹20; Case (c) 3,454 Debentures of ₹100 each and paid cash ₹60.]

22. Rama Ltd. took over following assets and liabilities of Krishna Ltd. on 1st April, 2019:

Land and Building ₹50,00,000

Furniture ₹10,00,000
Stock ₹5,00,000
Creditors ₹7,00,000

The purchase consideration of ₹ 60,00,000 was paid by issuing 12% Debentures of 100 each at a
premium of 20%
Pass the necessary Journal entries for the above in the books of Rama Ltd. (CBSE 2020)

[Ans: Goodwill- 2,00,000; No. of Debentures to be Issued-50,000)

23. Green Ltd. purchased the assets of Strong Ltd. ₹40,00,000 and took over liabilities of ₹7,00,000 for ₹
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.

24. Anthony Ltd. issued 20,000,9% Debentures of ₹100 each at 10% discount to Mithoo ltd from whom
assets of ₹23,50,000 and liabilities of ₹6,00,000 were taken over. Pass entries in the books of Anthony
Ltd. If debentures were to be redeemed at 5% premium.

25. Neeraj Ltd. took over business of Ajay Enterprises on 1-04-2020. The details of the agreement
regarding the assets and liabilities to be taken over are:
 Particulars Book Value(₹) Agreed Value (₹)

Building 20,00,000 35,00,000

Plant and Machinery 12,00,000 8,00,000
Stock 4,00,000 4,00,000
Trade receivables 5,00,000 4,00,000
Creditors 2,00,000 3,00,000
Outstanding expenses 50,000 1,00,000

It was decided to pay for purchase consideration as ₹7, 00,000 through Cheque and balance by issued
2,00,000, 9% Debentures of 20 each at a premium of 25%. Journalise.

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

Ans: (i) Dr. Incorporation Expenses or Preliminary Expenses A/c and Cr. Promoters' A/c by 5,000

(ii) Dr. Promoters A/c and Cr. 10% Debentures A/c by 5,00,000

(iii) Dr. Underwriting Commission A/c and Cr. Underwriters' A/c by ₹ 1,00,000

(iv) Dr. Underwriters A/c and Cr. 10% Debentures A/c 1,00,000

27. 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., if

Case 1. The debentures are issued at par.

Case 2. The debentures are issued at 20% premium
Case 3. The debentures are issued at 10% discount.

28. Star Ltd took over the assets of Rs.6,60,000 and liabilities of ₹ 80,000 of Moon Ltd. for Rs.6,00,000

Give necessary Journal entries in the books of Star Ltd. if:

Case 1. The purchase consideration was payable 10% in cash and the balance in 5,400; 12% Debentures
of Rs. 100 each

Case 2. The purchase consideration was payable 10% in cash and the balance in 4,500; 12% Debentures
of Rs.100 each issued at 20% premium.
Issue of Debentures as Collateral Security
29. A company took loan of ₹4,00,000 from Bandhan Bank Ltd. and issued 8% Debentures of ₹4,00,000
as a collateral security.

Explain how will the issue of debentures be dealt with in the books of the company.

30. Best Barcode Ltd. took 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.

31. X Ltd. took loan of ₹ 3,00,000 from IDBI Bank. The company issued 4,000, 9% Debentures of ₹ 100

each as a collateral security for the same. Show how these items will be shown in the Balance Sheet of

the company.

32. S. Singh Limited obtained loan of ₹ 5,00,000 from State Bank of India 10% p.a. interest. The company
issued₹7,50,000, 10% Debentures of ₹100 each in favor of State Bank of India as Collateral Security. Pass
necessary Journal entries for the above transactions:

(i) When company decided not to record the issue of 10% Debentures as Collateral Security.

(ii) When company decided to record the issue of 10% Debentures as Collateral Security.

Issue of Debentures with Terms of Redemption

33. Journalise the following:

(a) A debenture issued at ₹95, repayable at ₹100.

(b) A debenture issued at ₹95, repayable at ₹105.

(c) A debenture issued at ₹100, repayable at ₹105.

The face value of debenture is ₹100 in each of the above cases.

34. ZK Ltd: issued ₹4,00,000, 9% Debentures of ₹100 each at a discount of 5% redeemable at a premium
of 10% Pass necessary Journal entries for the above transactions in the Books of ZK Ltd.

35. On 1st April, 2018, Sakshi Ltd. issued 1,000, 11% Debentures of ₹100 each at a discount of 6%,
redeemable at a premium of 5% after three years.

Pass the necessary Journal entries for the issue of debentures in the books of Sakshi Ltd

36. Pass necessary Journal entries relating to the issue of debentures for the following:

(a) Issued ₹28,000: 10% Debentures of ₹100 each at a premium of 15% redeemable at par
(b) Issued ₹30,000: 10% Debentures of ₹100 each at a premium of 10% and redeemable at a premium of
15%

(c) Issued₹ 80,000; 10% Debentures of ₹100 each at par repayable at a premium of 10%.

37. Pass necessary Journal entries for the issue of debentures in the following cases:

(a) ₹40,000; 12% Debentures of ₹100 each issued at a premium of 5% redeemable at par.

(b) ₹70,000; 12% Debentures of ₹100 each issued at a premium of 5% redeemable at ₹110. (Delhi 2013)

38. Care Cosmetics Ltd. issued 50,000, 9% Debentures of 10 each on 1st April, 2021 redeemable at a
premium of 10% after 10 years. According to the terms of issue, ₹4 is payable on application and
balance on allotment of debentures. Record necessary Journal entries regarding issue of debentures.

Interest on Debentures
39. Agam Ltd. issued 40,000; 9% Debentures of ₹100 each on 1st April, 2022 at a discount of 10%
redeemable at a premium of 10%.

Assuming that the interest was paid half yearly on 30th September and 31st March, give Journal entries
relating to debenture interest for the half year ended 31st March, 2023.

40. Pratham Ltd. issued 50,000, 9% Debentures of ₹ 100 each on 1st April, 2022 at 10% discount,
redeemable at ₹10 premium. Interest is payable quarterly on 30th June, 30th September, 31st
December and 31st March Pass the Journal entries for interest for the period ended 30th June, 2022.

41. Bright Ltd. issued 5,000; 10% Debentures of 100 each on 1st April, 2022. The issue was fully
subscribed . As per the terms of issue, interest on the debentures is payable half-yearly on 30th
September and 31st March .Pass necessary Journal entries related to the debenture interest for the year
ending 31st March, 2023 and transfer of interest on debentures of the year to the Statement of Profit &
Loss

42. On 1st April, 2022, VVL Ltd. Issued 1,000, 9% Debentures of ₹ 100 each at a discount of 6%,
redeemable at a premium of 10% after three years. Pass necessary Journal entries for the issue of
debentures and debenture interest for the year ended 31st March, 2023, assuming that interest is
payable on 30th September and 31st March. The company closes its books on 31st March every year.

43. Pawan Hans Ltd. issued on 1st July, 2022, 10,000, 7% Debentures of 100 each for subscription at
10% premium payable ₹40 on application and balance on allotment. The debentures were subscribed
and due amounts were received. Interest was payable on 31st March each year.

Pass the Journal entry for issue of debentures and interest for the year ended 31st March, 2023 and
transfer the interest to Statement of Profit & Loss.

44. Suzlon Ltd. issued on 1st July, 2022, 20,000, 7% Debentures of 100 each for subscription at 10%
premium payable ₹40 on application; ₹40 (including premium) on allotment and balance on first and
final call. The debentures were subscribed and allotted. The company has not made first and final call
during the year ended 31st March, 2023. Interest was payable on 31st March each year.

Pass the Journal entry for issue of debentures and interest for the year ended 31st March, 2023 and
transfer the interest to Statement of Profit & Loss. [Ans: Interest-273,500)

Writing off Discount/Loss on Issue of Debentures

45. Kitply Ltd. issued ₹2,00,000, 10% Debentures at a discount of 5%. The terms of issue provide the
repayment at the end of 4 years. Kitply Ltd. has a balance of ₹5,00,000 in Securities Premium.

Pass the Journal entries for issue of debentures and writing off the discount.

46. Mercury Ltd. issued ₹10,00,000; 9% Debentures of ₹100 each at a discount of 6% on 1st April, 2022.
These debentures are to be redeemed equally, spread over 5 annual instalments. It had balance in
Capital Reserve of ₹75,000.

Pass the Journal entries for issue of debentures and writing off the discount.

47. Gladiators Ltd. issued 10,000, 8% Debentures of ₹100 each at a discount of 5%, redeemable at a
premium of 5% payable along with application. It had balance of ₹70,000 in Securities Premium and
₹50,000 in Capital Reserve. The debentures were fully subscribed and amounts were duly received.

Pass the necessary Journal entries for issue of debentures and writing off Loss on Issue of Debentures.

48. Sujata Ltd. Invited applications for issuing 50,000, 9% Debentures of ₹ 100 each at a discount of 10%
redeemable at par after 5 years. The debentures were fully subscribed and all money was duly received.
The company had a balance of ₹3,00,000 in Securities Premium which it decided to use for writing off
the discount/loss on issue of debentures. It also decided to write off the remaining discount/loss on
issue of debentures in the first year.

Pass the Journal entries for issue of debentures and for writing off discount/loss on issue of debentures.

49. On 1st January, 2018, Raha Ltd. issued 6,000, 8% Debentures of nominal (face) value of ₹ 100 each
redeemable at 5% premium in equal proportions at the end of 5, 10 and 15 years. It has a balance of
₹10,000 in Securities Premium.

Pass Journal entries. Also give Journal entries for writing off Loss on Issue of Debentures

50. Global Ltd. issued 10,000, 8% Debentures of ₹100 each redeemable in four equal instalments by
draw of lots from the end of 3 years at a premium of redeemable ₹9 .

Pass the Journal entries for writing off the Loss on issue of Debentures Also prepare Loss on Issue of
Debentures Account.

51. Garvit Ltd. invited applications for issuing 3,000, 11% Debentures of 100 each at a discount of 6%.
The full amount was payable on application. Applications were received for 3,600 debentures.
Applications for 600 debentures were rejected and the application money was refunded. Debentures
were allotted to the remaining applicants.
Pass the necessary Journal entries for the above transactions, including writing off the Discount on Issue
of Debentures, in the books of Garvit Ltd.
52. On 1st June, 2022, R Energy Ltd. issued 10,000, 7% Debentures of 100 each at a discount of 10%
redeemable at a premium of 10% at the end of five years. All the debentures were subscribed and
allotment was made Prepare the Balance Sheet (extract) as at 31st March, 2023,

53. On 1st April, 2022, Solar Power Ltd. Issued 10,000, 8% Debentures of 100 each at a discount of 5%
redeemable at a premium of 15% at the end of five years. All the debentures were subscribed and
allotment was made.

The company had balance in Securities Premium of 80,000.

Prepare the Balance Sheet (extract) as at 31st March, 2023.

54. On 1st April, 2018, Mathew Ltd. issued 10,000, 9% Debentures of 100 each at a discount of 5%,
redeemable at a premium of 5%. These debentures were redeemable as follows:

On 31st March, 2019 2,000 Debentures;

On 31st March, 2020 5,000 Debentures:
On 31st March, 2021 3,000 Debentures.

Prepare the Loss on Issue of Debentures Account, 9% Debentures Account and Premium on Redemptio
of Debentures Account for three years.

55. Dev Ltd. acquired running business of Amrit Ltd. having assets of ₹ 10,00,000 and liabilities of
₹2,50,000. 9% Debentures of ₹100 each were issued for the acquisition of business at a premium of ₹20
per debenture The company also issued 10,000, 8% Debentures of ₹100 each redeemable at premium of
₹20 per debenture after 5 years

You are required to pass the Journal entries for the above transactions.

56. Fit India Ltd. has paid up share capital of ₹ 1,00,00,000 divided into 5,00,000 Equity Shares of 20
each and 10,000, 7% Debentures of 200 each. On 1st July, 2021, it further issued 7% Debentures at a
premium of 10% redeemable at 25% premium to meet the long-term funds requirement of ₹
1,65,00,000. The issue price was payable along with application Balance in Securities Premium Account
after the issue of debentures is 25,00,000. Loss for the year ended 31st March, 2022 is 10,00,000

You are required to:

(i) Pass Journal entries for issue of Debentures.

(ii) Prepare Loss on Issue of Debentures Account
(iii)Pass Journal entries for interest on debentures, if interest is payable on 30th September and 31st
March each year.