on 1st April 2019 bright Ltd issued 400000 6 debentures of 100 is at a discount of 5 redeemable after 3 years the amount per debenture was payable as on application 80 per debenture on allotment…
Question
Basic Answer
Step 1: Calculate the issue price per debenture.
The debentures are issued at a 5% discount. Therefore, the issue price is 100 – (5% of 100) = 100 – 5 = 95.
Step 2: Calculate the total amount received on application.
400,000 debentures were issued at ₹80 per debenture on application. Total application money received = 400,000 * ₹80 = ₹32,000,000.
Step 3: Calculate the total amount received on allotment.
The balance amount per debenture is 95 – 80 = ₹15. Total allotment money received = 400,000 * ₹15 = ₹6,000,000.
Step 4: Calculate the total discount on issue of debentures.
Total discount = 400,000 debentures * ₹5 discount per debenture = ₹2,000,000
Step 5: Journal Entries
Here are the necessary journal entries:
Date: April 1, 2019
Entry 1: Application Money Received
| Account Name | Debit (₹) | Credit (₹) |
|---|---|---|
| Bank Account | 32,000,000 | |
| Application Money Account | 32,000,000 | |
| Being application money received |
Entry 2: Allotment Money Received
| Account Name | Debit (₹) | Credit (₹) |
|---|---|---|
| Bank Account | 6,000,000 | |
| Allotment Money Account | 6,000,000 | |
| Being allotment money received |
Entry 3: Transferring Application and Allotment Money to Debentures Account
| Account Name | Debit (₹) | Credit (₹) |
|---|---|---|
| Application Money Account | 32,000,000 | |
| Allotment Money Account | 6,000,000 | |
| Discount on Issue of Debentures | 2,000,000 | |
| 6% Debentures Account | 38,000,000 | |
| Being application and allotment money transferred to debentures account |
Final Answer
The journal entries reflect the receipt of application and allotment money and the recording of the debentures issued at a discount. The discount is recorded as a separate expense.
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