Aash Company Limited purchased assets of a book value of र2,20,000 from another company and agreed to make the payment of purchase consideration by issuing 2,000, 10% debentures of र100 each at a premium of 10%. What will be the journal entry for the issue of debentures?
Answer & explanation
Correct answer: option 2
The correct answer is option 2-
Vendors Dr. र2,20,000
To 10% Debentures A/c र2,00,000
To Securities Premium Reserve A/c र20,000
Following entries are passed for the purchase of assets and issue of debentures.
1. On purchase of assets:
Sundry Assets A/c Dr.
To Vendor’s
2. On issue of debentures At premium:
Vendors Dr.
To Debentures A/c
To Securities Premium Reserve A/c
In this case assets = र2,20,000
Issue 2000, 10% debentures of र100 each at a premium of 10%. So, journal entry will be-
Vendors Dr. 2,20,000
To Debentures A/c 2,00,000 (2000 x 100)
To Securities Premium Reserve A/c 20,000 (2000 x 10)