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Question
Mahima Ltd.issued ₹ 38,00,000, 9% Debentures of ₹ 100 each on 1st April, 2013. The debentures were redeemable at a premium of 5% on 30th June, 2015. The company transferred an amount of ₹ 9,50,000 to Debentures Redemption Reserve on 31st March, 2015. Investments as required by law were made in fixed deposit of a bank on 1st April, 2015.
Ignoring interest on fixed deposit ,pass necessary journal entries starting from 31st March, 2015 regarding redemption of debentures .
Solution
Journal
|
Date |
Particulars |
L.F. |
Debit Amount (Rs) |
Credit Amount (Rs) |
|
|
2015 |
|
|
|
|
|
|
Mar.31 |
Surplus i.e., Balance in Statement of Profit & Loss A/c |
Dr. |
|
9,50,000 |
|
|
|
To Debentures Redemption Reserve A/c |
|
|
|
9,50,000 |
|
|
(Amount transferred to DRR) |
|
|
|
|
|
|
|
|
|
|
|
|
Apr.01 |
Debenture Redemption Investment A/c |
Dr. |
|
5,70,000 |
|
|
|
To Bank A/c |
|
|
|
5,70,000 |
|
|
(Amount invested in specified security) |
|
|
|
|
|
|
|
|
|
|
|
|
June.30 |
Bank A/c |
Dr. |
|
5,70,000 |
|
|
|
To Debenture Redemption Investment A/c |
|
|
|
5,70,000 |
|
|
(Debenture Redemption Investment realized) |
|
|
|
|
|
|
|
|
|
|
|
|
June.30 |
9% Debenture A/c |
Dr. |
|
38,00,000 |
|
|
|
Premium on Redemption of Debenture A/c |
Dr. |
|
1,90,000 |
|
|
|
To Debenture holder’s A/c |
|
|
|
39,90,000 |
|
|
(Debenture due for redemption) |
|
|
|
|
|
|
|
|
|
|
|
|
June.30 |
Debenture holder’s A/c |
Dr. |
|
39,90,000 |
|
|
|
To Bank A/c |
|
|
|
39,90,000 |
|
|
(Debentures redeemed) |
|
|
|
|
|
|
|
|
|
|
|
|
June.30 |
Debentures Redemption Reserve A/c Dr. |
|
9,50,000 |
|
|
|
|
To General Reserve A/c |
|
|
9,50,000 |
|
|
|
(Debentures Redemption Reserve transferred to General Reserve) |
|
|
|
|
Working Note:
Amount required to be transferred to DRR
= 25% of Face Value of Debentures
= 25% of Rs 38,00,000 = Rs 9,50,000
Amount required to be transferred to DRI
= 15% of Face Value of Debentures
= 15% of Rs 38,00,000 = Rs 5,70,000
APPEARS IN
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