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On 1-4-2013 Nk Ltd. Had 15,000, 9% Debentures of Rs.100 Each Outstanding. - Accountancy

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On 1-4-2013 NK Ltd. had 15,000, 9% Debentures of Rs.100 each outstanding.

(i) On 1-4-2014 the company purchased from the open market 5,000 of its own debentures for Rs.102 each and cancelled the same immediately.

(ii) On 1-4-2015 company redeemed at par debentures of Rs.3, 00,000 by draw of lot.

(iii) On 17-2-2016 the remaining debentures were purchased for immediate cancellation for Rs.5, 99,500.

Ignoring debenture redemption reserve and interest on debentures pass necessary journal entries for the above transactions in the books of the company.

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Solution

In the books of NK Ltd

Journal

Date Particulars L.F. Dr.(Rs.) Cr.(Rs.)

2014

Apr 01

 

 

 

 

 

 

 

2016

Apr 01

 

 

 

 

 

 

2016

Feb 17

 

 

 

 

 

 

 

 

 

 

 

 

Own Debentures A/c                                                                                                                   Dr

           To Bank A/c

(Being purchase of 5,000 own debentures @ Rs.102 each)

 

9% Debentures A/c                                                                                                                     Dr

Loss on Issue of Debentures A/c                                                                                                  Dr

             To Own Debentures A/c

(Being 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 7,000 own debentures)

 

9% 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)

 

 

5,10,000

 

 

 

5,00,000

10,000

 

 

 

3,00,000

 

 

 

3,00,000

 

 

 

5,99,500

 

 

 

7,00,000

 

 

 

 

1,00,500

 

 

 

 

5,10,000

 

 

 

 

5,10,000

 

 

 

3,00,000

 

 

 

3,00,000

 

 

 

5,99,500

 

 

 

5,99,500

1,00,500

 

 

 

1,00,500

 

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