Question

On 1st April, 2022, RR Ltd., a listed manufacturing company, issued 15,000 8% Debentures of ₹ 100 each, due for redemption on 31st March, 2025, at a premium of 10%. The issue was fully subscribed. The debentures were redeemed on the due date. On 1st April, 2024, the company invested the required amount in the Debenture Redemption Investment Account, earning an interest @ 6% per annum.

You are required to pass the necessary journal entries in the books of RR Ltd. for the redemption of debentures for the year 2024-25. (Ignore Interest on Debentures)

Answer 1

Journal Entries in the books of RR Ltd. For the year 2024-25
Date	Particulars	L.F.	Debit (₹)	Credit (₹)
2024
April 1	Debenture Redemption Investment A/c   ...Dr.		2,25,000	-
	To Bank A/c		-	2,25,000
	(Being investment made in DRI @ 15% of face value)
2025
Mar 31	Bank A/c   ...Dr.		2,38,500	-
	To Debenture Redemption Investment A/c		-	2,25,000
	To Interest on DRI A/c		-	13,500
	(Being DRI realized along with interest earned)
Mar 31	8% Debentures A/c   ...Dr.		15,00,000	-
	Premium on Redemption of Debentures A/c   ...Dr.		1,50,000	-
	To Debentureholders A/c		-	16,50,000
	(Being the amount due to debentureholders on redemption)
Mar 31	Debentureholders A/c   ...Dr.		16,50,000	-
	To Bank A/c		-	16,50,000
	(Being payment made to debentureholders)
Mar 31	Interest on DRI A/c   ...Dr.		13,500	-
	To Statement of Profit and Loss		-	13,500
	(Being interest earned on DRI transferred to P&L)

Working Notes:

Nominal Value of Debentures = 15,000 × 100

= 15,00, 000

Premium on Redemption = `10/100 xx 15,00,000`

= 1,50, 000

DRI Investment (15%) = `15/100 xx 15,00,000`

= 2,25, 000

Interest on DRI (for 1year) = `2,25,000 xx 6/100 xx 1`

= 13,500