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Question
Godrej Ltd. has 20,000; 7% Debentures of ₹ 100 each due for redemption on 31st August, 2018. There is a balance of ₹ 3,50,000 in Debentures Redemption Reserve Account as on 31st March, 2016. Investment, as required by the Companies Act, 2013 is made on 1st April, 2017 in fixed deposit bearing interest @ 6% p.a. Bank deducted TDS @ 10% on its maturity which is 31st March, 2018.
Pass Journal entries for redemption of debentures.
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Solution
Journal
In the Books of Godrej Ltd.
|
Date |
Particulars |
L.F. |
Debit Amount (₹) |
Credit Amount (₹) |
|
| 2017 | |||||
| Apr. 01 |
Debenture Redemption Investment A/c |
Dr. |
3,00,000 |
||
| To Bank A/c |
3,00,000 |
||||
|
(Investment made in specified securities) |
|||||
|
2018 |
|
|
|
|
|
|
Mar. 31 |
Bank A/c (3,00,000 + 16,200) |
Dr. |
|
3,16,200 |
|
|
|
Tax Payable A/c |
Dr. |
|
1,800 |
|
| To Interest on Debenture Redemption Investment A/c | 18,000 | ||||
| To Debenture Redemeption Investment A/c | 3,00,000 | ||||
| (Investment encashed and interest received) | |||||
|
|
|
|
|
|
|
|
Mar. 31 |
Statement of Profit & Loss A/c |
Dr. |
|
1,50,000 |
|
|
|
To Debenture Redemption Reserve A/c |
|
|
|
1,50,000 |
|
|
(DRR created) |
|
|
|
|
|
Aug. 31 |
7% Debentures A/c |
Dr. |
|
20,00,000 |
|
| To Debentureholders' A/c | 20,00,000 | ||||
|
(Amount on 7% debentures due) |
|||||
|
Aug. 31 |
Debentureholders' A/c |
Dr. |
|
20,00,000 |
|
|
|
To Bank A/c |
|
|
|
20,00,000 |
|
|
(Payment made on redemption of debentures) |
|
|
|
|
|
|
|
|
|
|
|
|
Aug. 31 |
Debenture Redemption Reserve A/c |
Dr. |
|
5,00,000 |
|
|
|
To General Reserve A/c |
|
|
|
5,00,000 |
|
|
(Transfer of Debenture Redemption Reserve to General Reserve) |
|
|
|
|
Working Notes:
Calculation of amount transferred to DRR
|
Amount of DRR (25 % of Debentures) `= 2000000 xx 25/100` = |
500000 |
| Less : Amount already exists in DRR | 350000 |
| DRR to be created for redemption | 150000 |
Note:
1. The year of transfer to DRR and investment has been assumed to be in 2014 in order to maintain consistency with the guidelines issued by Ministry of Corporate Affairs which requires that every company required to create/maintain DRR shall on or before the 30th day of April of each year, deposit or invest, as the case may be, a sum which shall not be less than fifteen percent of the amount of its debentures maturing during the year ending on the 31st day of March next following year. Accordingly, entries for DRR and investment if passed in any of the year then redemption would take place in the following year.
RELATED QUESTIONS
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'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:
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(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.
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 ______.
Fill in the blank.
The portion of uncalled capital to be called only in the event of winding up of the company is called ____________.
Choose the appropriate alternative from the given options:
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| 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?
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).
