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Question
On 1st April, 2013 the following balances appeared in the books of Blue and Green Ltd.:
12%Debentures (Redeemable on 31st August, 2015)
₹ 20,00,000
Debentures Redemption Reserve ₹ 2,00,000.
The company met the requirements of Companies Act, 2013 regarding Debentures Redemption Reserve and Debentures Redemption Investments and redeemed the debentures.
Ignoring interest on investments, pass necessary journal entries for the above transactions in the books of company.
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Solution
Journal
|
Date |
Particulars |
L.F. |
Debit Amount (Rs) |
Credit Amount (Rs) |
|
|
2015 |
|
|
|
|
|
|
Mar.31 |
Surplus i.e., Balance in statement of Profit & Loss A/c |
Dr. |
|
3,00,000 |
|
|
|
To Debentures Redemption Reserve A/c |
|
|
|
3,00,000 |
|
|
(Amount transferred to DRR) |
|
|
|
|
|
|
|
|
|
|
|
|
Apr.30 |
Debenture Redemption Investment A/c |
Dr. |
|
3,00,000 |
|
|
|
To Bank A/c |
|
|
|
3,00,000 |
|
|
(Amount invested in specified security) |
|
|
|
|
|
|
|
|
|
|
|
|
Aug.31 |
Bank A/c |
Dr. |
|
3,00,000 |
|
|
|
To Debenture Redemption Investment A/c |
|
|
|
3,00,000 |
|
|
(Debenture Redemption Investment realized) |
|
|
|
|
|
|
|
|
|
|
|
|
Aug.31 |
9% Debenture A/c |
Dr. |
|
20,00,000 |
|
|
|
To Debenture holder’s A/c |
|
|
|
20,00,000 |
|
|
(Debenture due for redemption) |
|
|
|
|
|
|
|
|
|
|
|
|
Aug.31 |
Debenture holder’s A/c |
Dr. |
|
20,00,000 |
|
|
|
To Bank A/c |
|
|
|
20,00,000 |
|
|
(Debentures redeemed) |
|
|
|
|
|
|
|
|
|
|
|
|
Aug.31 |
Debentures Redemption Reserve A/c Dr. |
|
5,00,000 |
|
|
|
|
To General Reserve A/c |
|
|
5,00,000 |
|
|
|
(Debentures Redemption Reserve transferred to General Reserve) |
|
|
|
|
Working Notes:
Amount required to be transferred to DRR
= 25% of Face Value of Debentures
= 25% of Rs 20,00,000 = Rs 5,00,000
Existing Balance in DRR = Rs 2,00,000
Therefore, Amount transferred to DRR
= Rs 5,00,000 – 2,00,000 = Rs 3,00,000
Amount required to be transferred to DRI
= 15% of Face Value of Debentures
= 15% of Rs 20,00,000 = Rs 3,00,000
RELATED QUESTIONS
State the provisions of the Companies Act, 2013 for the creation of 'Debenture Redemption Reserve'.
Pass the necessary journal entries for the issue and redemption of Debentures in the following cases:
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Pass Journal entries regarding the issue and redemption of debentures, DRR and Investment without providing for the interest or loss on issue of debentures.
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Pass necessary Journal entries regarding issue, transfer to DRR, investment, and redemption of debentures.
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The company invested ₹ 3,00,000 in Government securities as required by the Companies Act, 2013.
Pass necessary journal entries for the above transactions.
Tata Motors Ltd. issued 40,000;7% Debentures of ₹ 100 each on 1st July,2009 redeemable at premium of 5% as under:
On 31st March,2015 16,000 Debentures
On 31st March,2016 16,000 Debentures
On 31st March,2017 8,000 Debentures
It was decided to transfer amount out of profit to Debentures Redemption Reserve ₹ 2,00,000 on 31st March, 2012; ₹ 4,00,000 on 31st March , 2013 and balance on 31st March, 2014. It invested the required amount in terms of the Companies Act, 2013 in Government Securities and decided to realise them after last redemption . Paas journal entries ignoring interest .
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(a) Issue 47,500 equity shares at a premium of ₹ 100 per share .
(b) Obtain a long-term loan from bank which was available at 12% per annum.
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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.
Fill in the blank.
The portion of uncalled capital to be called only in the event of winding up of the company is called ____________.
On 1st April 2015, Mayfair Ltd. issued 4,000 9% debentures of ₹ 100 each at a discount of 5% redeemable at a premium of 8%. The debentures were redeemable on 31st March 2019. The company created the necessary minimum amount of debenture redemption reserve and purchased the required amount of debenture redemption investments as per the provisions of Companies Act, 2013.
Pass the necessary journal entries for the redemption of debentures.
What is the maximum amount of debentures which an unlisted company, other than a NBFC and HFC, can redeem out of its capital?
On 1st April, 2017, Gabriel Ltd., a listed company, issued 3,000, 8% Debentures of ₹ 100 each. One-third of the Debentures were redeemed at par on 31st March, 2021 and the remaining two-third on 31st March, 2022. The company paid interest on debentures annually on 31st March.
After meeting the requirements of the Companies Act, 2013, regarding Debenture Redemption Investment, the company redeemed the debentures.
You are required to record necessary journal entries in the books of the company only on 31st March, 2022; including entries for interest on debentures.
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).
