Question

Great Sand Ltd offers $200 million in debentures, which is payable on application. The Interest rate on debentures is 8% per annum, payable annually. By 15 June 2018, applications are received for $240 million debentures. The debentures are allotted on 1 July 2018, which coincides with Great Sand Ltd’s financial year-end.

Required:

Prepare the journal entries to record the issue of the debentures and the annual interest payments on 30th June 2019.

Answer 1

(Amount in million)

Date	Particular	Debit	Credit
15th June, 2018	Bank A/C Dr	$240
	To Debenture application & allotment a/c		$240
	(Received Application money)
1st July, 2018	Debenture Application & allotment A/C	$240
	To 8% Debenture A/C		$200
	To Bank A/C		$40
	(Transferred application money to Debenture A/C)
30th June, 2019	Interest on Debenture A/C	$16
	To Debentureholder's Account		$16
	(Interest due on 8% Debenture)
30th June,2019	Debentureholder's Account A/C	$16
	To Bank A/C		$16
	(Interest on debentures paid to debntures holders)