CS Executive · Corporate Accounting and Financial Management · Accounting for Debentures
Sagar Ltd converts 5,000 10% debentures of ₹100 each, fully at par, into equity shares of ₹10 each issued at par. How many equity shares are allotted and by what amount is share capital credited?
Debentures worth ₹5,00,000 are converted at par into shares of ₹10 each, so 50,000 shares are allotted and equity share capital is credited by ₹5,00,000, equal to the debenture liability extinguished.
- A50,000 shares; ₹5,00,000Correct
- B5,000 shares; ₹50,000
- C50,000 shares; ₹50,000
- D5,00,000 shares; ₹50,00,000
Explanation
Debenture value = 5,000 x 100 = ₹5,00,000. Shares = 5,00,000 / 10 = 50,000. Share capital credited = 50,000 x 10 = ₹5,00,000. Taking ₹50,000 as capital wrongly applies the number of debentures times the share face value.
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