Lol Ltd. (unlisted company other than AIFI, Banking company, NBFC and HFC) provides the following information as at 31st March, 2025: Particulars ₹…

CA Foundation · Accounting · MTP · April 2025
Lol Ltd. (unlisted company other than AIFI, Banking company, NBFC and HFC) provides the following information as at 31st March, 2025: Particulars ₹ Shareholder's Funds (a) Share Capital Authorized Share Capital: 90,000 equity shares of 10 each fully paid 9,00,000 Issued and subscribed share capital: 60,000 equity shares of 10 each fully paid 6,00,000 (b) Reserves and Surplus Profit & Loss Account 3,24,000 Debenture Redemption Reserve 36,000 Non-current liabilities (a) Long term borrowings 12% Debentures 3,60,000 Current Liabilities (a) Trade payables 3,45,000 Non-current assets (a) Property, Plant and Equipment (Freehold property) 3,45,000 (b) Non-current Investment: DRR Investment 54,000 Current assets (a) Inventories 4,05,000 (b) Trade receivables 2,25,000 (c) Cash and bank balances: Cash at bank 5,46,000 Cash in hand 90,000 At the Annual General Meeting on 1.4.2025, it was resolved: (a) To give existing shareholders the option to purchase one 10 share at 15 for every four shares (held prior to the bonus distribution). This option was taken up by all the shareholders. (b) To issue one bonus share for every five shares held. (c) To repay the debentures at a premium of 3%. The DRR Investments realised at par as per existing Book value. Give the necessary journal entries for these transactions.

Suggested Answer and Working Notes:

Journal Entries in the Books of Lol Ltd. Particulars Dr. ₹ Cr. ₹ Bank A/c Dr. 2,25,000 To Equity Shareholders A/c 2,25,000 (Application money received on 15000 shares @15 per share to be issued as rights shares in the ratio of1:4) Equity Shareholders A/c Dr. 2,25,000 To Equity Share Capital A/c 1,50,000 To Securities Premium A/c 75,000 (Share application money on 15,000 shares @10 per share transferred to Share Capital Account, and 5per share to Securities Premium Account vide Board’s Resolution dated…) Securities Premium A/c Dr. 75,000 Profit & Loss A/c Dr. 75,000 To Bonus to Shareholders A/c 1,50,000 (Amount transferred for issue of bonus shares to existing shareholders in the ratio of1:5 vide General Body’s resolution dated...) Bonus to Shareholders A/c Dr. 1,50,000 To Equity Share Capital A/c 1,50,000 (Issue of bonus shares in the ratio of1for5vide Board’s resolution dated....) 12% Debentures A/c Dr. 3,60,000 Premium Payable on Redemption A/c Dr. 10,800 To Debenture holders A/c 3,70,800 (Amount payable to debentures holders) Profit and loss A/c Dr. 10,800* To Premium Payable on Redemption A/c 10,800 (Premium payable on redemption of debentures charged to Profit & Loss A/c) Debenture Redemption Reserve A/c Dr. 36,000 To General Reserve 36,000 (For DRR transferred to general reserve) Bank A/c Dr. 54,000 To Debenture Redemption Reserve Investment 54,000 (for DRR Investment realised) Debenture holders A/c Dr. 3,70,800 To Bank A/c 3,70,800 (Amount paid to debenture holders on redemption) * In the absence of details of the term of debentures (redemption period), the entire redemption premium was charged to profit & loss A/c of the year

Topics: Accounting for Bonus Issue and Right Issue

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