Question

G Ltd. issued 5,00,000, 12% debentures of Rs. 100 each on April 1, 2013, redeemable at par on July 1, 2017. The company received applications for 6,00,000 debentures, and the allotment was made to all the applicants on a pro-rata basis. The debentures were redeemed on the due date. How much of the Debenture Redemption Reserve is to be created before the redemption is carried out? Also, record necessary journal entries regarding the issue and redemption of debentures. Ignore tax deducted at source.

Answer 1

Journal of G Ltd.
Date	Particulars	L.F.	Debit (₹)	Credit (₹)
2013
Apr 01	Bank A/c   ...Dr.		6,00,00,000	-
	To Debenture Application & Allotment A/c		-	6,00,00,000
	(Being application money received for 6,00,000 debentures)
Apr 01	Debenture Application & Allotment A/c   ...Dr.		6,00,00,000	-
	To 12% Debentures A/c		-	5,00,00,000
	To Bank A/c		-	1,00,00,000
	(Being 5,00,000 debentures allotted at par on a pro-rata basis and excess application money refunded)
2017
Mar 31	Surplus in Statement of Profit & Loss A/c   ...Dr.		1,25,00,000	-
	To Debenture Redemption Reserve (DRR) A/c		-	1,25,00,000
	(Being DRR created out of profits at 25% of nominal value)
Apr 30	Debenture Redemption Investment (DRI) A/c ...Dr.		75,00,000	-
	To Bank A/c		-	75,00,000
	(Being regulatory 15% statutory investment made)
June 30	Bank A/c   ...Dr.		75,00,000	-
	To Debenture Redemption Investment (DRI) A/c		-	75,00,000
	(Being DRI encashed at par on the eve of redemption)
July 01	12% Debentures A/c ...Dr.		5,00,00,000	-
	To Debentureholders A/c		-	5,00,00,000
	(Being principal amount due to debentureholders on maturity)
July 01	Debentureholders A/c    ...Dr.		5,00,00,000	-
	To Bank A/c		-	5,00,00,000
	(Being the final payment made to the debentureholders)
July 01	Debenture Redemption Reserve A/c   ...Dr.		1,25,00,000	-
	To General Reserve A/c		-	1,25,00,000
	(Being total accumulated DRR balance transferred to General Reserve after complete redemption)