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On 1-4-2013 JN Ltd had 5,000, 10% Debentures of 100 each outstanding. (i) On 1-4-2014 the company purchased in the open market 2000 of its own debentures for 105 each and cancelled the same immediately. - Accountancy

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On 1-4-2013 JN Ltd had 5,000, 10% Debentures of 100 each outstanding.

(i) On 1-4-2014 the company purchased in the open market 2000 of its own debentures for 105 each and cancelled the same immediately.

(ii) On 1-4-2015 the company redeemed at par debentures of 1,00,000 by draw of a lot.

(iii) On 28-2-2016 the remaining debentures were purchased for immediate cancellation for 1,97,000

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Solution

In the books of JN Ltd
Journal

Date Particulars L.F.

Dr.

Rs

Cr.

Rs

2014
Apr 01

 

 

 

 

 

 

 

 

 

2015
Apr.01

 

 

 

 

 

 

2016
Feb.28

 

 

 

 

 

 

 

 

 

Own Debentures A/c                                                  Dr

                  To Bank A/c

(Being purchase of 2,000 own debentures @ Rs 105 each)

10% Debentures A/c                                         Dr

Loss on Cancellation of own Debentures           Dr

                To Own Debentures A/c

(Being cancellation of own debentures)

Statement of P&L/ Capital Profits A/c                     Dr

                To Loss on Cancellation of own Debentures

 

9% Debentures A/c                                       Dr

               To Debenture holders A/c

(Being 9% debenture due for redemption)

Debenture holders A/c                                  Dr

                To Bank A/c

(Being amount paid to debenture holders)

 

Own Debentures A/c                                       Dr

                To Bank A/c

(Being purchase of 2,000 own debentures)

10% Debentures A/c                                      Dr

               To Own Debentures A/c

               To Gain (Profit) on Cancellation

(Being own debentures purchased and cancelled)

Gain on Cancellation A/c                              Dr

              To Capital Reserve A/c

(Being transfer of gain on redemption of debentures to
Capital Reserve)

 

2,10,000

 

 

2,00,000

10,000

 

 

10,000

 

 

1,00,000

 

 

1,00,000

 

 

 

1,97,000

 

 

4,00,000

 

 

 

3,000

 

 

 

2,10,000

 

 

 

2,10,000

 

 

10,000

 

 

1,00,000

 

 

1,00,000

 

 

 

1,97,000

 

 

1,97,000

3,000

 

 

3,000

 

Concept: Redemption of Debentures for Immediate Cancellation - Draw of Lots, Lump Sum and Purchase in the Open Market
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