On 1st April, 2014, Kk Ltd. Invited Applications for Issuing 5,000 10% Debentures of Rs 1,000 Each at a Discount of 6%. These Debentures Were Repayable at the End of 3rd Year at a Premium of 10%. - Accountancy

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On 1st April, 2014, KK Ltd. invited applications for issuing 5,000 10% debentures of Rs 1,000 each at a discount of 6%. These debentures were repayable at the end of 3rd year at a premium of 10%. Applications for 6,000 debentures were received and the debentures were allotted on pro-rata basis to all the applicants. Excess money received with applications was refunded.
The directors decided to transfer the minimum amount to Debenture Redemption Reserve on 31.3.2016. On 1.4.2016, the company invested the necessary amount in 9% bank fixed deposit as per the provisions of the Companies Act, 2013. Tax was deducted at source by bank on interest @10% p.a.
Pass the necessary journal entries for issue and redemption of debentures. Ignore entries relating to writing off loss on issue of debentures and interest paid on debentures.

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Solution

                              In the books of KK Ltd.

                                             Journal

Date

Particulars 

L.F

Debit Amount (Rs.)

Credit Amount (Rs.)

2014

   

 

 

 

Apr-01

Bank A/c

Dr.

 

5640000

 

 

    Debenture Application & Allotment A/c

 

 

 

5640000

 

(Debenture application money received @ Rs. 940 each on 6000 debentures

 

 

 

 

Apr-01

Debenture Application & Allotment A/c

Dr.

 

5640000

 

 

Loss on Issue of Debentures A/c

Dr.

 

800000

 

 

    10% Debentures A/c

 

 

 

5000000

 

    Premium on Redermption of Debentures A/c

 

 

 

500000

 

    Bank A/c

 

 

 

940000

 

(Debentures allotted at a discount of 6% to be redeemable at a 10% premium. Excess refunded.

 

 

 

 

2016

   

 

 

 

Mar-31

Balance in Statement of P/L

Dr.

 

1250000

 

 

    Debenture Redemption Reserve

 

 

 

1250000

 

(DRR created at 25%)

 

 

 

 

Apr-01

Debenture Redemption Investment A/c

Dr.

 

750000

 

 

    Bank A/c

 

 

 

750000

 

(DRI in 9% Fixed deposit @ 15% of Debenture Face Value)

 

 

 

 

2017

   

 

 

 

Mar-31

10% Debentures A/c

Dr.

 

5000000

 

 

Premium on Redemption of Debentures A/c

Dr.

 

500000

 

 

Debentureholders A/c

 

 

 

5500000

 

(Debenture and premium repayment made due)

 

 

 

 

Mar-31

Bank A/c

Dr.

 

810750

 

 

Income Tax Paid A/c

Dr.

 

6750

 

 

    Debenture Redemption Investment A/c

 

 

 

750000

 

    Interest on Debenture Redemption Investment A/c

 

 

 

67500

 

(DRI matured and 9% Interest received thereon. Tax Deducted at source being 10% of the interest)

 

 

 

 

Mar-31

Debentureholders A/c

Dr.

 

5500000

 

 

    Bank A/c

 

 

 

5500000

 

(Amount paid to debentureholders)

 

 

 

 

Mar-31

Debenture Redemption Reserve

Dr.

 

1250000

 

 

    General Reserve

 

 

 

1250000

 

(DRR transferred to General Reserve

 

 

 

 

 

Concept: Interest on Debentures
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