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ISSUE OF DEBENTURES

ISSUE OF DEBENTURES AT PAR & PAYBACK AT PAR

The company has issued 15,000 7% debentures of Rs.100 each at par and agreed to pay back after 3 years at par.


General Journal Entry:
Bank (15,000 x 100) 1,500,000 (Dr.)
7% Debentures payable (15,000 x 100) 1,500,000 (Cr.)
(To record the issue of 7% debentures at par and payback after 3 years at par).

Explanation:
When company issued debentures, it received cash from public. It increases the bank account of the company recorded as debit with 1,500,000. This cash has to be returned after 3 years so it also increases the liability of company recorded as credit titled debentures payable with 1,500,000.


ISSUE OF DEBENTURES AT PREMIUM & PAYBACK AT PAR

The company has issued 23,000 10% debentures of Rs.100 each at Rs.105 and agreed to pay back after 5 years at Rs.100 each.


GENERAL JOURNAL ENTRY:
Bank (23,000 x 105) 2,415,000 (Dr.)
10% Debentures payable (23,000 x 100) 2,300,000 (Cr.)
Premium on debentures (23,000 x 5) 115,000 (Cr.)
(To record the issue of 10% debentures at premium and payback at par after 5 year).

EXPLANATION:
Company issued debentures at Rs.105 each which increases the bank account recorded as debit with 2,415,000 and also increases the liability recorded as credit with par value of debentures (2,300,000) and company issued the debentures more than its par value. It increases the premium of the company recorded as credit with 115,000.


ISSUE OF DEBENTURES AT DISCOUNT & PAYBACK AT PAR

The company has issued 30,000 8% debentures of Rs.100 each at Rs.95 and redeemable after 5 years at Rs.100 each.


GENERAL JOURNAL ENTRY:
Bank (30,000 x 95) 2,850,000 (Dr.)
Discount on debentures (30,000 x 5) 150,000 (Dr.)
8% Debentures payable (30,000 x 100) 3,000,000 (Cr.)
(To record the issue of 8% debentures at discount and payback at par after 5 years)

EXPLANATION:
Company issued debentures which increases the bank account recorded as debit with the amount Rs.2,850,000 (30,000 x 95 = 2,850,000) and issued at less than par value which is recorded as discount debit with the amount of Rs.150,000 (30,000 x 5 = 150,000) and also increase the liability of the company recorded as credit with the par value of debentures Rs.3,000,000 (30,000 x 100 = 3,000,000).


ISSUE OF DEBENTURES AT PAR & PAYBACK AT PREMIUM

The company has issued 26,000 6% debentures of Rs.100 each at par and redeemable after 6 years at Rs.106 each.


GENERAL JOURNAL ENTRY:
Bank (26,000 x 100) 2,600,000 (Dr.)
Loss on redemption (26,000 x 6) 156,000 (Dr.)
6% Debentures payable (26,000 x 100) 2,600,000 (Cr.)
Premium on redemption (26,000 x 6) 156,000 (Cr.)
(To record the issue of 6% debentures at par and payback at premium after 6 years)

EXPLANATION:
Company issued debentures which increases the bank account of company with the amount of Rs.2,600,000 (26,000 x 100 = 2,600,000). Company issued debentures of Rs.100 but payback to the public at Rs.106 each debentures. Rs.6 is a loss on redemption on each debentures which is debited with the amount of Rs.156,000 (26,000 x 6 = 156,000). Issuance of debentures increases the liability of the company recorded as credit with the par value of debentures Rs.2,600,000 (26,000 x 100 = 2,600,000) but the actual liability of the company is Rs.106 of each debentures so remaining liability of Rs.6 will be credited as premium on redemption with the amount of Rs.156,000. This premium shows the liability of the company which company has to pay to the public as premium.


ISSUE OF DEBENTURES AT DISCOUNT & PAYBACK AT PREMIUM

The company has issued 35,000 9% debentures of Rs.100 each at Rs.93 and redeemable after 8 years at Rs.106 each.


GENERAL JOURNAL ENTRY:
Bank (35,000 x 93) 3,255,000 (Dr.)
Loss on redemption (35,000 x 6) 210,000 (Dr.)
Discount on debentures (35,000 x 7) 245,000 (Dr.)
9% Debentures payable (35,000 x 100) 3,500,000 (Cr.)
Premium on redemption (35,000 x 6) 210,000 (Cr.)
(To record the issue of 9% debentures at discount and payback at premium after 8 years)

EXPLANATION:
Company issued debentures at discount increases the bank account with the actual amount received Rs.3,255,000 (35,000 x 93 = 3,255,000) and increase in discount recorded as debit with the discount amount Rs.245,000 (35,000 x 7 = 245,000) and company will return the public more than par value of the debentures which is treated as loss on redemption and will be recorded as debit with the amount Rs.210,000 (35,000 x 6 = 210,000). Issuance increases the liability recorded as credit with par value of debentures Rs.3,500,000 (35,000 x 100 = 3,500,000) and company will pay premium to the public after maturity which will also treated as the liability recorded as credit premium on redemption with Rs.210,000 (35,000 x 6 = 210,000).

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