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Accountancy · 2023 · 6 marks
Issue and Redemption of DebenturesIssue of Debentures for Consideration other than Cash6 markslong answer
CBSE 2023 · Region 3 · Set 2 · Q26
(a) On 1st April, 2021, LM Ltd. issued ₹ 45,00,000, 12% Debentures of ₹ 50 each at a discount of 10%. On 31st March, 2022 it decided to write off…
(a)
On 1st April, $\displaystyle 2021$, LM Ltd. issued ₹ $\displaystyle 45{,}00{,}000$, $\displaystyle 12$% Debentures of ₹ $\displaystyle 50$ each at a discount of $\displaystyle 10$%. On 31st March, $\displaystyle 2022$ it decided to write off discount on issue of debentures according to the provisions of the Companies Act, 2013. It had a credit balance of ₹ $\displaystyle 1$,'$\displaystyle 75{,}000$ in its 'Securities Premium Reserve Account'. Pass necessary journal entries for the above transaction in the books of the company. (b) On 1st April, $\displaystyle 2022$, KR Ltd. acquired assets of ₹ $\displaystyle 50{,}00{,}000$ from SM Ltd. and took over liabilities of ₹ $\displaystyle 10{,}00{,}000$ for a purchase consideration of ₹ $\displaystyle 40{,}00$,000. ₹ $\displaystyle 20{,}00{,}000$ were paid to SM Ltd. by issuing $\displaystyle 12$% Debentures of ₹ $\displaystyle 100$ each at a premium of $\displaystyle 25$%, ₹ $\displaystyle 15{,}00{,}000$ were paid by issuing a crossed cheque in favour of SM Ltd. For the balance, KR Ltd. accepted a Bill of Exchange drawn upon them by SM Ltd. payable after three months. Pass necessary journal entries for the above transactions in the books of the company.
Marking-scheme solution
Books of LM Ltd.
JOURNAL
Date Particulars LF Amount Amount
₹ ₹
$\displaystyle 2021$ (i)
Apr $\displaystyle 1$ Bank A/c Dr. $\displaystyle 40{,}50{,}000$
To Debenture Application & $\displaystyle 40{,}50{,}000$
Allotment A/c
(Application money received on $\displaystyle 90{,}000$)
__________________________________
(ii)
Debenture Application &
Allotment A/c Dr.
$\displaystyle 40{,}50{,}000$
Discount / Loss on issue of
Debentures A/c Dr.
$\displaystyle 4{,}50{,}000$
To $\displaystyle 9$% Debentures A/c
$\displaystyle 45{,}00{,}000$
(debentures issued at $\displaystyle 10$% discount)
__________________________________
(iii)
$\displaystyle 2022$
Statement of Profit & Loss Dr.
Mar $\displaystyle 2{,}75000$
$\displaystyle 31$ Securities Premium / Securities
Premium Reserve A/c Dr.
$\displaystyle 1{,}75{,}000$
To Discount / Loss on Issue of
Debentures A/c
$\displaystyle 4{,}50{,}000$
(Discount / loss on issue of debentures
written off)
__________________________________
(b)On 1st April, $\displaystyle 2022$, KR Ltd. acquired…..
Ans
Books of KR Ltd.
JOURNAL
Date Particulars LF Dr. Cr.
Amount ₹ Amount ₹
$\displaystyle 2022$ (i)
Apr $\displaystyle 1$ Sundry Assets A/c Dr. $\displaystyle 50{,}00{,}000$
To Sundry Liabilities A/c $\displaystyle 10{,}00{,}000$
To SM Ltd $\displaystyle 40{,}00{,}000$
(Assets acquired and liabilities taken
over from SM Ltd)
_________________________________
(ii)
SM Ltd Dr
To Bank A/c $\displaystyle 15{,}00{,}000$
(Purchase consideration partially settled $\displaystyle 15{,}00{,}000$
by issuing a crossed cheque)
_________________________________
(iii)
SM Ltd Dr
To Bills Payable A/c
$\displaystyle 5{,}00{,}000$
(Purchase consideration partially settled
$\displaystyle 5{,}00{,}000$
by accepting a bill of exchange)
(iv)
SM Ltd Dr
To $\displaystyle 10$% Debentures A/c
$\displaystyle 20{,}00{,}000$
To Securities Premium A/c /
$\displaystyle 16{,}00{,}000$
Securities Premium Reserve A/c
$\displaystyle 4{,}00{,}000$
(Remaining Purchase consideration
settled by issuing $\displaystyle 16{,}000$ $\displaystyle 12$% debentures
at premium)
Alternatively (for (ii)+(iii)+(iv))
SM Ltd Dr
$\displaystyle 40{,}00{,}000$
To Bank A/c
$\displaystyle 15{,}00{,}000$
To Bills Payable A/c
$\displaystyle 5{,}00{,}000$
To $\displaystyle 10$% Debentures A/c
$\displaystyle 16{,}00{,}000$
To Securities Premium A/c /
$\displaystyle 4{,}00{,}000$
Securities Premium Reserve A/c
(Purchase consideration settled by
issuing a crossed cheque, accepting a bill
of exchange and issuing $\displaystyle 16{,}000$ $\displaystyle 12$%
debentures at premium)
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