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Question
Jerome Ltd., an unlisted manufacturing company, had 20,000, 6% Debentures of ₹ 100 each due for redemption at par on 31st March, 2022. On this date the company had the required amount of ₹ 2,00,000 in its Debenture Redemption Reserve.
The Debenture Redemption Investment which was purchased on 30th April, 2021, was realised at 98% on the date of redemption and the debentures were redeemed on the due date.
You are required to pass journal entries in the books of the company for the year 2021-22. (Ignore interest on debentures).
Solution
| Journal Entries | ||||
| Date | Particulars | L.F. | Dr. (₹) | Cr. (₹) |
| 2021 April 30 |
Debenture Redemption Investment A/c ...Dr. | 3,00,000 | ||
| To Bank A/c (20,00,000 × 15%) | 3,00,000 | |||
| (Investments made) | ||||
| 2022 March 31 |
Bank A/c ...Dr. | 2,94,000 | ||
| Loss on Sale of Investment A/c ...Dr. | 6,000 | |||
| To Debenture Redemption Investment A/c | 3,00,000 | |||
| (Investments en-cashed at loss) | ||||
| March 31 | Statement of Profit and Loss A/c ...Dr. | 6,000 | ||
| To Loss on Sale of Investment A/c | 6,000 | |||
| (Loss incurred of sale of investment adjusted) | ||||
| March 31 | 8% Debentures A/c ...Dr. | 20,00,000 | ||
| To Debentureholders A/c | 20,00,000 | |||
| (Money due to debentureholders transferred) | ||||
| March 31 | Debentureholders A/c ...Dr. | 20,00,000 | ||
| To Bank A/c | 20,00,000 | |||
| (Payment made to debentureholders) | ||||
| March 31 | Debenture Redemption Reserve A/c ...Dr. | 2,00,000 | ||
| To General Reserve A/c | 2,00,000 | |||
| (DRR balance transferred to General Reserve) | ||||
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