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Question
'Ananya Ltd.' had an authorised capital of ₹ 10,00,00,000 divided into 10,00,000 equity shares of ₹ 100 each. The company had already issued 2,00,000 shares. The dividend paid per share for the year ended 31st March,2007 was ₹ 30 . The management decided to export its products to African countries . To meet the requirements of additional funds, the finance manager put up the following three alternate proposals before the Board of Directors:
(a) Issue 47,500 equity shares at a premium of ₹ 100 per share .
(b) Obtain a long-term loan from bank which was available at 12% per annum.
(c) Issue 9% Debentures at a discount of 5%.
After evaluating these alternatives , the company decided to issue 1,00,000,9% Debentures on 1st April,2008. The face value of each debentures was ₹ 100 . These debentures were redeemable in four installments starting from the end of third year, which were as follows:
| Year | III | IV | V | VI |
| Amount (₹) | 10,00,000 | 20,00,000 | 30,00,000 | 40,00,000 |
Prepare 9% Debenture Account form 1st April, 2008 till all the debentures were redeemed.
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Solution
9% Debentures Account
Dr. Cr.
|
Date |
Particulars |
J.F. |
Amount Rs |
Date |
Particulars |
J.F. |
Amount Rs |
|
|
2009 |
|
|
|
2008 |
|
|
|
|
|
Mar. 31 |
Balance c/d |
|
1,00,00,000 |
Apr. 01 |
Debenture Application A/c |
|
95,00,000 |
|
|
|
|
|
|
Apr. 01 |
Discount on Issue of Debentures A/c |
|
5,00,000 |
|
|
|
|
|
1,00,00,000 |
|
|
|
1,00,00,000 |
|
|
2010 |
|
|
|
2009 |
|
|
|
|
|
Mar. 31 |
Balance c/d |
|
1,00,00,000 |
Apr. 01 |
Balance b/d |
|
1,00,00,000 |
|
|
|
|
|
1,00,00,000 |
|
|
|
1,00,00,000 |
|
|
2011 |
|
|
|
2010 |
|
|
|
|
|
Mar. 31 |
Debentureholders’ A/c |
|
10,00,000 |
Apr. 01 |
Balance b/d |
|
1,00,00,000 |
|
|
Mar. 31 |
Balance c/d |
|
90,00,000 |
|
|
|
|
|
|
|
|
|
1,00,00,000 |
|
|
|
1,00,00,000 |
|
|
2012 |
|
|
|
2011 |
|
|
|
|
|
Mar. 31 |
Debentureholders’ A/c |
|
20,00,000 |
Apr. 01 |
Balance b/d |
|
90,00,000 |
|
|
Mar. 31 |
Balance c/d |
|
70,00,000 |
|
|
|
|
|
|
|
|
|
90,00,000 |
|
|
|
90,00,000 |
|
|
2013 |
|
|
|
2012 |
|
|
|
|
|
Mar. 31 |
Debentureholders’ A/c |
|
30,00,000 |
Apr. 01 |
Balance b/d |
|
70,00,000 |
|
|
Mar. 31 |
Balance c/d |
|
40,00,000 |
|
|
|
|
|
|
|
|
|
70,00,000 |
|
|
|
70,00,000 |
|
|
2014 |
|
|
|
2013 |
|
|
|
|
|
Mar. 31 |
Debentureholders’ A/c |
|
40,00,000 |
Apr. 01 |
Balance b/d |
|
40,00,000 |
|
|
|
|
|
40,00,000 |
|
|
|
40,00,000 |
|
RELATED QUESTIONS
State the provisions of the Companies Act, 2013 for the creation of 'Debenture Redemption Reserve'.
Pass the necessary journal entries for the issue and redemption of Debentures in the following cases:
(i) 15,000, 9% Debentures of Rs 250 each issued at 5% premium, repayable at 15% premium.
(ii) 2,00,000, 12% Debentures of Rs 10 each issued at 8% premium, repayable at par.
Star Ltd. is a manufacturer of chemical fertilisers. Its annual turnover is ₹ 50 crores. The company had issued 5,000, 12% Debentures of ₹ 500 each at par. Calculate the amount of Debentures Redemption Reserve which needs to be created to meet the requirements of law.
On 31st March, 2003, G Ltd. had ₹ 8,00,000;9% Debentures due for redemption. The company had a balance of ₹ 1,40,000 in its Debentures Redemption Reserve . Pass necessary journal entries for redemption of debentures.
Apollo Ltd.issued 21,000; 8% Debentures of ₹ 100 each on 1st April, 2013 redeemable at a premium of 8% on 30th June, 2019. The company decided to transfer the required amount to Debentures Redemption Reserve in three equal annual instalments starting with 31st March, 2017. Required investment was made in Government Securities on 30th April, 2019. Ignore interest on debentures and also investment.
Pass necessary Journal entries regarding issue, transfer to DRR, investment, and redemption of debentures.
Mahima Ltd.issued ₹ 38,00,000, 9% Debentures of ₹ 100 each on 1st April, 2013. The debentures were redeemable at a premium of 5% on 30th June, 2015. The company transferred an amount of ₹ 9,50,000 to Debentures Redemption Reserve on 31st March, 2015. Investments as required by law were made in fixed deposit of a bank on 1st April, 2015.
Ignoring interest on fixed deposit ,pass necessary journal entries starting from 31st March, 2015 regarding redemption of debentures .
Hp Ltd. has 1,00,000;8% Debentures of ₹ 50 each due for redemption in five equal annual installments starting from 30th June, 2015. Debentures Redemption Reserve has a balnce of ₹ 5,00,000 on that date . Pass journal entries.
Tata Motors Ltd. issued 40,000;7% Debentures of ₹ 100 each on 1st July,2009 redeemable at premium of 5% as under:
On 31st March,2015 16,000 Debentures
On 31st March,2016 16,000 Debentures
On 31st March,2017 8,000 Debentures
It was decided to transfer amount out of profit to Debentures Redemption Reserve ₹ 2,00,000 on 31st March, 2012; ₹ 4,00,000 on 31st March , 2013 and balance on 31st March, 2014. It invested the required amount in terms of the Companies Act, 2013 in Government Securities and decided to realise them after last redemption . Paas journal entries ignoring interest .
Shahi Ltd. decided to redeem its 8,000, 11% debentures of ₹ 100 each at a premium of 10%. The minimum amount transferred to the debenture redemption reserve will be:
No debenture redemption reserve is required for debentures issued by ______.
On 1st April 2015, Mayfair Ltd. issued 4,000 9% debentures of ₹ 100 each at a discount of 5% redeemable at a premium of 8%. The debentures were redeemable on 31st March 2019. The company created the necessary minimum amount of debenture redemption reserve and purchased the required amount of debenture redemption investments as per the provisions of Companies Act, 2013.
Pass the necessary journal entries for the redemption of debentures.
Relay Ltd. (an unlisted Non NBFC) redeems its 8,000, 10% Debentures of ₹ 100 each in instalments as follows:
| Date of Redemption | Debentures to be redeemed |
| 31st March, 2019 | 2,000 |
| 31st March, 2020 | 5,000 |
| 31st March, 2021 | 1,000 |
On the basis of the above details, what will be the amount of Debenture Redemption Reserve which the company will transfer to General Reserve on 31st March, 2021?
What is the maximum amount of debentures which an unlisted company, other than a NBFC and HFC, can redeem out of its capital?
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).
On 1st April, 2022, Resorts Ltd. (a listed construction company) had 60,000, 5% Debentures of ₹100 each due for redemption at par on 31st March, 2023.
As per the law, investment was made in a fixed deposit of a bank on 30th April, 2022, earning interest @5% per annum.
Tax @10% was deducted by the bank on the interest.
You are required to pass necessary journal entries in the year of redemption of debentures, including entries for interest on Debenture Redemption Investment. (Ignore the interest on Debentures)
Ronny Ltd. (an unlisted construction company) redeems its 7,000, 10% Debentures of ₹100 each at a premium of 5% in instalments, as follows:
| Date of Redemption | Debentures to be redeemed |
| 31st March, 2022 | 2,000 |
| 31st March, 2023 | 3,000 |
| 31st March, 2024 | 2,000 |
You are required to prepare for the year 2023-24:
- General Reserve Account.
- Debenture holders’ Account. (Ignore interest on Debentures).
