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Question
On 1st April, 2014, KK Ltd. invited applications for issuing 5,000 10% debentures of Rs 1,000 each at a discount of 6%. These debentures were repayable at the end of 3rd year at a premium of 10%. Applications for 6,000 debentures were received and the debentures were allotted on pro-rata basis to all the applicants. Excess money received with applications was refunded.
The directors decided to transfer the minimum amount to Debenture Redemption Reserve on 31.3.2016. On 1.4.2016, the company invested the necessary amount in 9% bank fixed deposit as per the provisions of the Companies Act, 2013. Tax was deducted at source by bank on interest @10% p.a.
Pass the necessary journal entries for issue and redemption of debentures. Ignore entries relating to writing off loss on issue of debentures and interest paid on debentures.
Solution
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In the books of KK Ltd. |
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Journal |
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Date |
Particulars |
L.F |
Debit Amount (Rs.) |
Credit Amount (Rs.) |
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2014 |
|
|
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||
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Apr-01 |
Bank A/c |
Dr. |
|
5640000 |
|
|
|
Debenture Application & Allotment A/c |
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5640000 |
|
|
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(Debenture application money received @ Rs. 940 each on 6000 debentures |
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|
|
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Apr-01 |
Debenture Application & Allotment A/c |
Dr. |
|
5640000 |
|
|
|
Loss on Issue of Debentures A/c |
Dr. |
|
800000 |
|
|
|
10% Debentures A/c |
|
|
5000000 |
|
|
|
Premium on Redermption of Debentures A/c |
|
|
500000 |
|
|
|
Bank A/c |
|
|
940000 |
|
|
|
(Debentures allotted at a discount of 6% to be redeemable at a 10% premium. Excess refunded. |
|
|
|
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2016 |
|
|
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Mar-31 |
Balance in Statement of P/L |
Dr. |
|
1250000 |
|
|
|
Debenture Redemption Reserve |
|
|
1250000 |
|
|
|
(DRR created at 25%) |
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|
|
|
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Apr-01 |
Debenture Redemption Investment A/c |
Dr. |
|
750000 |
|
|
|
Bank A/c |
|
|
750000 |
|
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(DRI in 9% Fixed deposit @ 15% of Debenture Face Value) |
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|
|
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2017 |
|
|
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Mar-31 |
10% Debentures A/c |
Dr. |
|
5000000 |
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|
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Premium on Redemption of Debentures A/c |
Dr. |
|
500000 |
|
|
|
Debentureholders A/c |
|
|
5500000 |
|
|
|
(Debenture and premium repayment made due) |
|
|
|
|
|
Mar-31 |
Bank A/c |
Dr. |
|
810750 |
|
|
|
Income Tax Paid A/c |
Dr. |
|
6750 |
|
|
|
Debenture Redemption Investment A/c |
|
|
750000 |
|
|
|
Interest on Debenture Redemption Investment A/c |
|
|
67500 |
|
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(DRI matured and 9% Interest received thereon. Tax Deducted at source being 10% of the interest) |
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Mar-31 |
Debentureholders A/c |
Dr. |
|
5500000 |
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Bank A/c |
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5500000 |
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(Amount paid to debentureholders) |
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Mar-31 |
Debenture Redemption Reserve |
Dr. |
|
1250000 |
|
|
|
General Reserve |
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|
1250000 |
|
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|
(DRR transferred to General Reserve |
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