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Master Problem 1

Give journal entries in each of the following alternative cases assuming the face value of the debenture issued is ₹ 100:

  1. 10 per cent debenture issued at ₹ 100 repayable at ₹ 100.
  2. 10 per cent debenture issued at ₹ 95 repayable at ₹ 100.
  3. 10 per cent debenture issued at ₹ 105 repayable at ₹ 100.
  4. 10 per cent debenture issued at ₹ 100 repayable at ₹ 110.
  5. 10 per cent debenture issued at ₹ 95 repayable at ₹ 110.
  6. 10 per cent debenture issued at ₹ 110 repayable at ₹ 120.
  7. 10 per cent debenture issued at ₹ 90 repayable at ₹ 95.

Solution:

 

Case (a): Issue at Par and Redeemable at Par
 



Case (b): Issue at Discount and Redeemable at Par

 



Case (c): Issue at Premium and Redeemable at Par

 



Case (d): Issue at Par and Redeemable at Premium

 



Case (e): Issue at Discount and Redeemable at Premium

 

Note: Loss on issue of debentures = Discount on issue of debentures + Premium on redemption.

 

Case (f): Issue at Premium and Redeemable at Premium

 


 

Case (g): Issue at Discount and Redeemable at Discount

 

Note: Discount on redemption is a gain to the company at the time of redemption.

 

According to the prudence principal and realization concepts, the discount on redemption of debentures, which is anticipated unrealized gain, should not be taken into account at the time of issue of debentures and hence no entry is passed to record for such gain.





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