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Question
Krishna Ltd. had outstanding 20,000, 9% debentures of ₹ 100 each on 1st April 2014. These debentures were redeemable at a premium of 10% in two equal installments starting from 31st March 2018. The company had a balance of ₹ 4,00,000 in Debenture Redemption Reserve on 31st March 2017. Pass necessary journal entries for the redemption of debentures in the books of Krishna Ltd. for the year ended 31st March 2018.
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Solution
Books of Krishna Ltd.
Journal
| Date | Particulars | L.F. |
Debit Amount (₹) |
Credit Amount (₹) |
|
| 2017 | |||||
| April 01 | Debenture Redemption Investment A/c (15% of ₹ 10,00,000) | Dr. | 1,50,000 | ||
| To Bank A/c | 1,50,000 | ||||
| (Being investment made to the extent of minimum 15% of the redeemable value of debentures) | |||||
| 2018 | |||||
| March 31 | Bank A/c | Dr. | 1,50,000 | ||
| To Debenture Redemption Investment A/c | 1,50,000 | ||||
| (Being investment in securities realised) | |||||
| March 31 | Statement of Profit & Loss A/c | Dr. |
1,00,000 |
||
| To Debenture Redemption Reserve A/c |
1,00,000 |
||||
| (Being shortage in DRR to the extent of 25% of the nominal value of debentures transferred to DRR) | |||||
| March 31 | 9% Debenture A/c | Dr. |
10,00,000 |
||
| Premium on Redemption of Debentures A/c | Dr. | 1,00,000 | |||
| To Debenture holder’s A/c | 11,00,000 | ||||
| (Being redemption of 10,000 debentures due in the first installment ) | |||||
| March 31 | Debenture holders A/c | Dr. | 11,00,000 | ||
| To Bank A/c | 11,00,000 | ||||
| (Being payment made to debenture holders) | |||||
| March 31 | Debenture Redemption Reserve A/c | Dr. | 2,50,000 | ||
| To General Reserve A/c | 2,50,000 | ||||
| (Being proportionate amount of DRR transferred to General reserve) |
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