Question

APL Ltd., an unlisted construction company has 50,000, 10% Debentures of ₹ 100 each due for redemption at par on 31^st March, 2024. The Debenture Redemption Investment was purchased on 30^th April, 2023 and was sold on the date of redemption at 104% less 0.7% commission. APL Ltd. had sufficient balance in its Debenture Redemption Reserve A/c as per the provisions of the Companies’ Act, 2013.

You are required to prepare the following Ledger Accounts for the year 2023-2024:

1. Debenture Redemption Reserve A/c  (1)
2. Debenture Redemption Investment A/c  (2)

Answer 1

i.

Dr.	Debenture Redemption Reserve A/c				Cr.
Date	Particulars	Amount (₹)	Date	Particulars	Amount (₹)
31.3.2024	To General reserve	5,00,000	1.04.2023	By Balance b/d	5,00,000
		5,00,000			5,00,000

ii.

Dr.	Debenture Redemption Investment A/c				Cr.
Date	Particulars	Amount (₹)	Date	Particulars	Amount (₹)
30.4.2023	To Bank A/c	7,50,000	31.03.2024	By Bank A/c	7,74,540
31.3.2024	To Profit on sale of Investment	24,540
		7,74,540			7,74,540

Working Note:

Total Face Value of Debentures = 50,000 Debentures ×  ₹ 100

= ₹ 50,00,000

Debenture Redemption Reserve:

We assume the full 10% was already in the account before the current financial year.

The required amount is 10% of ₹ 50,00,000 = ₹ 5,00,000

Debenture Redemption Investment:

₹ 50,00,000 × `15/100` = ₹ 7,50,000

Investments sold = ₹ 7,50,000 × 104%

= ₹ 7,80,000

Commission = ₹ 7,80,000 × 0.7%

= ₹ 5,460

Net sales value of investment = ₹ 7,80,000 – ₹ 5,460

= ₹ 7,74,540

Profit on sale of investments = ₹ 7,74,540 – ₹ 7,50,000

= ₹ 24,540