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Question
Sarvottam Ltd. Decided to redeem its 1250, 12% Debentures of Rs 100 each. It purchased 850 Debentures from the open market at Rs 96 per Debenture. The remaining Debenture were redeemed out of profit. The company has already made a provision for Debenture Redemption Reserve in its books.
Pass necessary Journal entries in the books of the company for the above transaction.
Solution
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Sarvottam Ltd. |
|||||
|
Date |
Particulars |
L.F. |
Debit Amount Rs |
Credit Amount Rs |
|
|
(1) |
Own Debentures |
Dr. |
|
81,600 |
|
|
|
To Bank A/c |
|
|
|
81,600 |
|
|
(850 own debentures purchased at Rs 96 each) |
|
|
|
|
|
|
|
|
|
|
|
|
(2) |
12% Debentures A/c |
Dr. |
|
85,000 |
|
|
|
To Own Debentures A/c |
|
|
|
81,600 |
|
|
To Profit on cancellation of own Debentures |
|
|
|
3,400 |
|
|
(850 own debenture cancelled) |
|
|
|
|
|
|
|
|
|
|
|
|
(3) |
12% Debentures A/c |
Dr. |
|
40,000 |
|
|
|
To Debentures holders |
|
|
|
40,000 |
|
|
(400 Debentures due for redemption) |
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(4) |
Debentures holder A/c |
Dr. |
|
4,00,000 |
|
|
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To Bank A/c |
|
|
|
4,00,000 |
|
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(Payments of due for debenture paid to debenture holder) |
|
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(5) |
Profit on Cancellation of own Debenture A/c |
Dr. |
|
3,400 |
|
|
|
To Capital Reserve A/c |
|
|
|
3,400 |
|
|
(Profit on cancellation of own debentures transferred to capital reserve) |
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