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.
Solution
In the books of Mayfair Ltd.
Journal
| Date | Particulars | L.F. |
Debit Amount (₹) |
Credit Amount (₹) |
|
| 2018 | |||||
| March 31 |
Surplus i.e. Balance as per Statement of Profit & Loss A/c |
Dr. | 1,00,000 | ||
|
To Debenture Redemption Reserve A/c |
1,00,000 | ||||
|
(Being 25% of 4,000 debentures transferred to DRR) |
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|
|
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| 2018 |
Debenture Reserve Investment A/c |
Dr. | 60,000 | ||
| April 30 |
To Bank A/c |
60,000 | |||
|
(Being Debenture Redemption Investment made at 15% for 4,000 debentures ) |
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|
|
|||||
| 2019 |
Bank A/c |
Dr. | 60,000 | ||
| March 31 |
To Debenture Reserve Investment A/c |
60,000 | |||
|
(Being debenture reserve securities matured) |
|||||
|
|
|||||
| 2019 |
9% Debenture A/c |
Dr. | 4,00,000 | ||
| March 31 |
Premium on Redemption A/c |
Dr. | 32,000 | ||
|
To Debenture holder’s A/c |
4,32,000 | ||||
|
(For amount due on debenture holders) |
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|
|
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| 2019 |
Debenture holders A/c |
Dr. | 4,32,000 | ||
|
March 31 |
To Bank A/c | 4,32,000 | |||
|
|
(For debentures paid) | ||||
|
|
|||||
| 2019
|
Debenture Redemption Reserve A/c | Dr. |
1,00,000 |
||
| March 31 | To General Reserve A/c |
1,00,000 |
|||
| (For DRR transferred to General reserve) |
