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A company issued 4,000, 14% debentures of 100 each as a collateral security to a bank who has advanced a loan of 3,50,000 to the company for a period of 5 years. Pass journal entries at the time of issue of debentures and repayment of loan after the given period. Also show it in the company's balance sheet in the year of issue of debentures?
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A company issued 4,000, 14% debentures of 100 each as a collateral sec...
Journal Entries at the Time of Issue of Debentures:
1. Debenture Issue Account Dr. (4000 x 100) 400,000
To Debenture Holder Account (4000 x 100) 400,000
2. Bank Account Dr. 350,000
To Loan Account 350,000
3. Loan Account Dr. 350,000
To Debenture Issue Account 350,000
Journal Entries at the Time of Repayment of Loan:
1. Loan Account Dr. 350,000
To Bank Account 350,000
2. Debenture Redemption Account Dr. (4000 x 100) 400,000
To Debenture Holder Account (4000 x 100) 400,000
3. Debenture Holder Account Dr. (4000 x 100) 400,000
To Debenture Redemption Account (4000 x 100) 400,000
Balance Sheet in the Year of Issue of Debentures:
Liabilities Amount (Rs.) Assets Amount (Rs.)
Share Capital XXX,XXX Fixed Assets XXX,XXX
Reserves and Surplus XXX,XXX Investments XXX,XXX
Loan from Bank XXX,XXX Current Assets XXX,XXX
Debentures 400,000 Cash and Bank Balance XXX,XXX
Current Liabilities XXX,XXX Debtors XXX,XXX
Stock XXX,XXX
Prepaid Expenses XXX,XXX
Other Current Assets XXX,XXX
Total Assets XXX,XXX
Total Liabilities XXX,XXX Total Liabilities and Assets XXX,XXX
Explanation:
- The first journal entry records the issue of debentures. The company issues 4,000 debentures with a face value of Rs. 100 each. The total value of debentures issued is Rs. 400,000. The Debenture Issue Account is debited, representing the increase in the liability of the company, and the Debenture Holder Account is credited, representing the amount owed to the debenture holders.
- The second journal entry records the loan received from the bank. The Bank Account is debited with the loan amount of Rs. 350,000, and the Loan Account is credited, representing the liability of the company towards the bank.
- The third journal entry transfers the loan amount to the Debenture Issue Account. This entry reduces the liability of the loan and increases the liability of the debentures.
- The fourth journal entry records the repayment of the loan. The Loan Account is debited, representing the reduction in the liability of the company, and the Bank Account is
1. Debenture Issue Account Dr. (4000 x 100) 400,000
To Debenture Holder Account (4000 x 100) 400,000
2. Bank Account Dr. 350,000
To Loan Account 350,000
3. Loan Account Dr. 350,000
To Debenture Issue Account 350,000
Journal Entries at the Time of Repayment of Loan:
1. Loan Account Dr. 350,000
To Bank Account 350,000
2. Debenture Redemption Account Dr. (4000 x 100) 400,000
To Debenture Holder Account (4000 x 100) 400,000
3. Debenture Holder Account Dr. (4000 x 100) 400,000
To Debenture Redemption Account (4000 x 100) 400,000
Balance Sheet in the Year of Issue of Debentures:
Liabilities Amount (Rs.) Assets Amount (Rs.)
Share Capital XXX,XXX Fixed Assets XXX,XXX
Reserves and Surplus XXX,XXX Investments XXX,XXX
Loan from Bank XXX,XXX Current Assets XXX,XXX
Debentures 400,000 Cash and Bank Balance XXX,XXX
Current Liabilities XXX,XXX Debtors XXX,XXX
Stock XXX,XXX
Prepaid Expenses XXX,XXX
Other Current Assets XXX,XXX
Total Assets XXX,XXX
Total Liabilities XXX,XXX Total Liabilities and Assets XXX,XXX
Explanation:
- The first journal entry records the issue of debentures. The company issues 4,000 debentures with a face value of Rs. 100 each. The total value of debentures issued is Rs. 400,000. The Debenture Issue Account is debited, representing the increase in the liability of the company, and the Debenture Holder Account is credited, representing the amount owed to the debenture holders.
- The second journal entry records the loan received from the bank. The Bank Account is debited with the loan amount of Rs. 350,000, and the Loan Account is credited, representing the liability of the company towards the bank.
- The third journal entry transfers the loan amount to the Debenture Issue Account. This entry reduces the liability of the loan and increases the liability of the debentures.
- The fourth journal entry records the repayment of the loan. The Loan Account is debited, representing the reduction in the liability of the company, and the Bank Account is
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A company issued 4,000, 14% debentures of 100 each as a collateral security to a bank who has advanced a loan of 3,50,000 to the company for a period of 5 years. Pass journal entries at the time of issue of debentures and repayment of loan after the given period. Also show it in the company's balance sheet in the year of issue of debentures?
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A company issued 4,000, 14% debentures of 100 each as a collateral security to a bank who has advanced a loan of 3,50,000 to the company for a period of 5 years. Pass journal entries at the time of issue of debentures and repayment of loan after the given period. Also show it in the company's balance sheet in the year of issue of debentures? for Commerce 2024 is part of Commerce preparation. The Question and answers have been prepared according to the Commerce exam syllabus. Information about A company issued 4,000, 14% debentures of 100 each as a collateral security to a bank who has advanced a loan of 3,50,000 to the company for a period of 5 years. Pass journal entries at the time of issue of debentures and repayment of loan after the given period. Also show it in the company's balance sheet in the year of issue of debentures? covers all topics & solutions for Commerce 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for A company issued 4,000, 14% debentures of 100 each as a collateral security to a bank who has advanced a loan of 3,50,000 to the company for a period of 5 years. Pass journal entries at the time of issue of debentures and repayment of loan after the given period. Also show it in the company's balance sheet in the year of issue of debentures?.
A company issued 4,000, 14% debentures of 100 each as a collateral security to a bank who has advanced a loan of 3,50,000 to the company for a period of 5 years. Pass journal entries at the time of issue of debentures and repayment of loan after the given period. Also show it in the company's balance sheet in the year of issue of debentures? for Commerce 2024 is part of Commerce preparation. The Question and answers have been prepared according to the Commerce exam syllabus. Information about A company issued 4,000, 14% debentures of 100 each as a collateral security to a bank who has advanced a loan of 3,50,000 to the company for a period of 5 years. Pass journal entries at the time of issue of debentures and repayment of loan after the given period. Also show it in the company's balance sheet in the year of issue of debentures? covers all topics & solutions for Commerce 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for A company issued 4,000, 14% debentures of 100 each as a collateral security to a bank who has advanced a loan of 3,50,000 to the company for a period of 5 years. Pass journal entries at the time of issue of debentures and repayment of loan after the given period. Also show it in the company's balance sheet in the year of issue of debentures?.
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