Answer question number 14
Q14. In 1st April, 2011,Khanak Ltd. issued 10,000; 10% debentures of Rs. 100 each at 95% and redeemable at premium of 10% after 5 year and offered the holders an option to convert their holdings into equity shares of Rs. 10 each at a premium of 25% after 31st March, 2016 25%, of the holders exercised their option.
Give necessary journal entries both at the time of issue and at the time of conversion.
Dear Student
Regards
| Journal in the books of Khanak Ltd. | ||||
| Date | Particulars | Debit | Credit | |
| Entry at the time of Issue: | ||||
| 01-04-11 | Bank A/c (10,000 x 95) | Dr. | 950,000 | |
| Discount of Issue of Debentures (10,000 x 5) | Dr. | 50,000 | ||
| To 10% Debentures A/c | 1,000,000 | |||
| (Being 10% Debentures issued) | ||||
| Loss on Issue of Debentures A/c (10,000 x 100) 10%) | Dr. | 100,000 | ||
| To Premium on Redemption of Debentures A/c | 100,000 | |||
| (Being premium on redemption booked) | ||||
| Entry at the time of Conversion : | ||||
| 10% Debentures A/c (10,000 x 25%) x 100 | Dr. | 250,000 | ||
| Premium on Redemption of Debenture A/c (10,000 x 25%) x 10 | Dr. | 25,000 | ||
| To Debenture Holders A/c | 275,000 | |||
| (Amount due to debenture holders) | ||||
| Debenture Holders A/c | Dr. | 275,000 | ||
| To Equity share capital (2,75,000 /12.5) x 10 | 220,000 | |||
| To Securities Premium A/c (22,000 x 2.5) | 55,000 | |||
| (Being 22,000 shares (2,75,000/12.5) of Rs 10 each issued at Rs 2.5 premium | ||||
Regards