Question

Venus Ltd. had 9,000, 9% Debentures of ₹ 100 each due for redemption . These debentures are to be redeemed in 3 equal installments (starting from 31st March,2015) at a premium of 10%. The company had a balance of ₹ 25,000 in the Debentures Redemption Reserve .
Pass necessary entries for redemption of debentures assuming that company transfer the balance of DRR to General Reserve after redeeming all the debentures. 

Answer 1

Journal

Date	Particulars		L.F.	Debit Amount (₹)	Credit Amount (₹)
2014
Mar. 31	Statement of Profit and Loss	Dr.		2,00,000
	To Debenture Redemption Reserve A/c				2,00,000
	(Transfer of balance amount to DRR)
Apr. 30	Debenture Redemption Investment A/c	Dr.		45,000
	To Bank A/c				45,000
	(15% amount invested in securities)
2015
Mar. 31	9% Debentures A/c	Dr.		3,00,000
	Premium on Redemption of Debentures A/c	Dr.		30,000
	To Debentureholders’				3,30,000
	(3,000, 9% Debentures due for payment at 10% premium)
	Bank A/c	Dr.		45,000
	To Debenture Redemption Investment A/c				45,000
	(DRI encashed)
	Debentureholders’ A/c	Dr.		3,30,000
	To Bank A/c				3,30,000
	(Payment to debentureholders’)
Apr. 30	Debenture Redemption Investment A/c	Dr.		45,000
	To Bank A/c				45,000
	(15% amount invested in securities)
2016
Mar. 31	9% Debentures A/c	Dr.		3,00,000
	Premium on Redemption of Debentures A/c	Dr.		30,000
	To Debentureholders’				3,30,000
	(3,000, 9% Debentures due for payment at 10% premium)
	Bank A/c	Dr.		45,000
	To Debenture Redemption Investment A/c				45,000
	(DRI encashed)
	Debentureholders’ A/c	Dr.		3,30,000
	To Bank A/c				3,30,000
	(Payment to debentureholders’)
Apr. 30	Debenture Redemption Investment A/c	Dr.		45,000
	To Bank A/c				45,000
	(15% amount invested insecurities)
2017
Mar. 31	9% Debentures A/c	Dr.		3,00,000
	Premium on Redemption of Debentures A/c	Dr.		30,000
	To Debentureholders’				3,30,000
	(3,000, 9% Debentures due for payment at 10% premium)
	Bank A/c	Dr.		45,000
	To Debenture Redemption Investment A/c				45,000
	(DRI encashed)
	Debentureholders’ A/c	Dr.		3,30,000
	To Bank A/c				3,30,000
	(Payment to debentureholders’)
	Debenture Redemption Reserve A/c	Dr.		2,25,000
	To General Reserve A/c				2,25,000
	(DRR closed by transferring to General Reserve)

Working Notes:

Amount to be transferred to DRR = `900000 xx 25/100 = 225000`

Existing Balance in DRR = Rs 25000

Net Amount to be Transferred`= 225000 - 25000` = Rs 200000

Amount transferred to DRI `= 900000 xx 15/100 = 135000` (in three equal instalments of 45000 each)