Question

Jerome Ltd., an unlisted manufacturing company, had 20,000, 6% Debentures of ₹100 each due for redemption at par on 31st March, 2022. On this date the company had the required amount of ₹ 2,00,000 in its Debenture Redemption Reserve.

The Debenture Redemption Investment which was purchased on 30th April, 2021, was realised at 98% on the date of redemption and the debentures were redeemed on the due date.

You are required to pass journal entries in the books of the company for the year 2021-22. (Ignore interest on debentures).

Answer 1

Journal Entries
Date	Particulars	L.F.	Dr. (₹)	Cr. (₹)
2021
April 30	Debenture Redemption Investment A/c   ...Dr.		3,00,000	-
	To Bank A/c (20,00,000 × 15%)		-	3,00,000
	(Investments made)
2022
March 31	Bank A/c   ...Dr.		2,94,000	-
	Loss on Sale of Investment A/c   ...Dr.		6,000	-
	To Debenture Redemption Investment A/c		-	3,00,000
	(Investments en-cashed at loss)
March 31	Statement of Profit and Loss A/c   ...Dr.		6,000	-
	To Loss on Sale of Investment A/c		-	6,000
	(Loss incurred of sale of investment adjusted)
March 31	6% Debentures A/c   ...Dr.		20,00,000	-
	To Debentureholders A/c		-	20,00,000
	(Money due to debentureholders transferred)
March 31	Debentureholders A/c   ...Dr.		20,00,000	-
	To Bank A/c		-	20,00,000
	(Payment made to debentureholders)
March 31	Debenture Redemption Reserve A/c   ...Dr.		2,00,000	-
	To General Reserve A/c		-	2,00,000
	(DRR balance transferred to General Reserve)