Question

C. Ltd. has outstanding 11,00,000, 10% debentures of Rs. 200 each, on April 1, 2017. The Board of Directors have decided to purchase 20% of own debentures for cancellation at Rs. 200 each. Record necessary entries for the same.

Answer 1

Journal of C. Ltd.
Date	Particulars	L.F.	Debit (₹)	Credit (₹)
2017
Apr 01	Own Debentures A/c   ...Dr.		4,40,00,000	-
	To Bank A/c		-	4,40,00,000
	(Being 2,20,000 own debentures purchased from the open market at par for immediate cancellation)
Apr 01	10% Debentures A/c   ...Dr.		4,40,00,000	-
	To Debenture holders A/c		-	4,40,00,000
	(Being the purchased own debentures formally cancelled)

Working Notes:

Total Outstanding Debentures Amount = 11,00,000 × 200

= 22,00,00,000

Number of Debentures to be Purchased (20%) = `11,00,000 xx 20/100`

= 2,20,000

Nominal (Face) Value of Debentures to be Cancelled = 2,20,000 × 200

= 4,40,00,000

Purchase Cost (at Rs. 200 each) = 2,20,000 × 200

= 4,40,00,000