question_answer

XYZ Ltd. issued 1,00,000, 9% debentures of Rs. 50 each at a premium of 10% on 30th June, 2015 redeemable on 31st March, 2017. The issue was fully subscribed. The company decided to create DRR on 31st March, 2016 and also decided to invest in 10% government securities to meet the requirement. Pass journal entries for redemption of debentures.

Answer:

                                                                        JOURNAL

Date	Particulars		LF	Amt (Dr)	Amt (Cr)
2016
Mar 31	Surplus, i.e. Balance in Statement of Profit and Loss	Dr		12,50,000
	To Debentures Redemption Reserve A/c				12,50,000
	(Being 25% of value of debentures transferred to DRR)
Apr 30	Debentures Redemption Investment A/c	Dr		7,50,000
	To Bank A/c				7,50,000
	(Being 15% of the value of debentures invested in government securities)
2017
Mar 31	Bank A/c	Dr		8,18,750
	To Debentures Redemption Investment A/c				7,50,000
	To Interest Earned A/c \[\left( 7,50,000\times \frac{10}{100}\times \frac{11}{12} \right)\]				68,750
	(Being the investments bearing 10% interest per annum encashed on redemption of debentures)
Mar 31	9% Debentures A/c	Dr		50,00,000
	To Debenture holders' A/c				50,00,000
	(Being the amount due on redemption of debentures)
Mar 31	Debentureholders' A/c	Dr		50,00,000
	To Bank A/c				50,00,000
	(Being the payment made to redeem debentures)
Mar 31	Debenture Redemption Reserve A/c	Dr		12,50,000
	To General Reserve A/c				12,50,000
	(Being the DRR transferred to general reserve after redemption of debentures)