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  .

Answer 1

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