OGOYA Ltd is a fast-growing company in need of new financing to fund its expansi
ID: 2531616 • Letter: O
Question
OGOYA Ltd is a fast-growing company in need of new financing to fund its expansion plans. It is hoping to raise $10 million dollars from a debt issuance. It is considering the following options:
A Issue 2-year 8% debentures at par on January 1, 2019. Interest payments are made annually at the end of each year. The debenture matures on December 31, 2020.
B Issue 2-year 4% convertible debentures at par on January 1, 2019. The debentures can be converted into 10 million $1 shares at maturity on December 31, 2020. Interest payments are made annually at the end of each year. Without the conversion feature, the debenture would be priced the same as option A.
Question show the journal entries for A and B from 1 january 2019 to 31 December 2020 the face value 10 million
Explanation / Answer
A) Journal entries for debt issuance in the books of OGOYA Ltd
(B) Journal entries for debt issuance in the books of OGOYA Ltd
Date
Particulars
Debit($)
Credit($)
1-1-2019
Bank A/c
10000000
4% debenture application &allotment
10000000
( 4% debenture issued at par)
1-1-2019
4% debenture application &allotment
10000000
4% Debentures
10000000
(4% debentures issued at par)
31-12-2019
Debenture Interest
400000
Debenture holders
400000
( Interest due for year)
31-12-2019
Debenture Holders
400000
Bank
400000
(Payment of interest)
31-12-2019
Statement of profit and loss
400000
Debenture Interest A/c
400000
(Debenture interest transferred to profit and loss account
31-12-2020
Debenture Interest
400000
Debenture holders
400000
( Interest due for year)
31-12-2020
Debenture Holders
400000
Bank
400000
(Payment of interest)
31-12-2020
Statement of profit and loss
400000
Debenture Interest A/c
400000
(Debenture interest transferred to profit and loss account
31-12-2020
4% Debentures A/c
10000000
Debenture holders
10000000
(Amount due on maturity)
31-12-2020
Debenture holders
10000000
Equity Shares Capital
10000000
(Issue of 10 million equity shares at $1 per shares if conversion is accepted)
31-12-2020
Debenture holders
10000000
Bank A/c
10000000
(Payment made to debenture holders if debentures not converted)
Date
Particulars
Debit($)
Credit($)
1-1-2019
Bank A/c
10000000
8% debenture application &allotment
10000000
( 8% debenture issued at par)
1-1-2019
8% debenture application &allotment
10000000
8% Debentures
10000000
(8% debentures issued at par)
31-12-2019
Debenture Interest
800000
Debenture holders
800000
( Interest due for year)
31-12-2019
Debenture Holders
800000
Bank
800000
(Payment of interest)
31-12-2019
Statement of profit and loss
800000
Debenture Interest A/c
800000
(Debenture interest transferred to profit and loss account
31-12-2020
Debenture Interest
800000
Debenture holders
800000
( Interest due for year)
31-12-2020
Debenture Holders
800000
Bank
800000
(Payment of interest)
31-12-2020
Statement of profit and loss
800000
Debenture Interest A/c
800000
(Debenture interest transferred to profit and loss account
31-12-2020
8% Debentures A/c
10000000
Debenture holders
10000000
(Amount due on maturity)
31-12-2020
Debenture holders
10000000
Bank A/c
10000000
(Payment made to debenture holders)
Date
Particulars
Debit($)
Credit($)
1-1-2019
Bank A/c
10000000
4% debenture application &allotment
10000000
( 4% debenture issued at par)
1-1-2019
4% debenture application &allotment
10000000
4% Debentures
10000000
(4% debentures issued at par)
31-12-2019
Debenture Interest
400000
Debenture holders
400000
( Interest due for year)
31-12-2019
Debenture Holders
400000
Bank
400000
(Payment of interest)
31-12-2019
Statement of profit and loss
400000
Debenture Interest A/c
400000
(Debenture interest transferred to profit and loss account
31-12-2020
Debenture Interest
400000
Debenture holders
400000
( Interest due for year)
31-12-2020
Debenture Holders
400000
Bank
400000
(Payment of interest)
31-12-2020
Statement of profit and loss
400000
Debenture Interest A/c
400000
(Debenture interest transferred to profit and loss account
31-12-2020
4% Debentures A/c
10000000
Debenture holders
10000000
(Amount due on maturity)
31-12-2020
Debenture holders
10000000
Equity Shares Capital
10000000
(Issue of 10 million equity shares at $1 per shares if conversion is accepted)
31-12-2020
Debenture holders
10000000
Bank A/c
10000000
(Payment made to debenture holders if debentures not converted)
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