Question

Ntex Ltd. issued 10,000, 10% Debentures of Rs.100 each at a premium of

Answer 1

Answer:

1. When the application money is reieved, Debit Bank for Rs.1,100,000; and Credit Debentures Application and Allotment a/c for Rs.1,100,000,

2. To transfer of application money along with premium on debentures allotted to the debentures account, Debit Debentures Application and Allotment a/c for Rs.1,100,000; Debit Debenture a/c for Rs.1,000,000; and Credit Security Premium Reserve a/c  for Rs.100,000.

Explanation:

Since allotment were made, it implies the accounts for application and allotment can be combined. Therefore, the journal entries will look as follows:

Accounts Title                                                      Dr (Rs.)              Cr (Rs.)  

Bank (w.1)                                                           1,100,000

Debentures Application and Allotment a/c                              1,100,000

(To record the amount received from debenture application with the premium)  

Debentures Application and Allotment a/c    1,100,000

Debenture a/c (w.2)                                                                  1,000,000

Security Premium Reserve a/c (w.3)                                           100,000

(To record the transfer of application money along with premium on debentures allotted to the debentures account)

Working:

w.1: Bank = (Units of debentures * Unit price) * (1 + Premium rate) = (10,000 * Rs.100) * (1 + 10%) = Rs. 1,100,000

w.2. Debenture = Units of debentures * Unit price = 10,000 * Rs.100 = Rs.1,000,000

w.3 Security Premium Reserve = Debenture * Premium rate = Rs.1,000,000 * 10% = Rs.100,000