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Question
On 1st April, 2016, following were the balances of Blue Bird Ltd.:
| 10% Debentures (redeemable on 30th September, 2017) | ₹ 15,00,000 |
| Debentures Redemption Reserve | ₹ 2,00,000 |
The company met the requirements of the Companies Act, 2013 regarding Debentures Redemption Reserve and Investment and redeemed the debentures.
Pass necessary Journal entries for the above transactions in the books of the company.
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Solution
Journal
|
Date |
Particulars |
L.F. |
Debit Amount (₹) |
Credit Amount (₹) |
|
| 2017 | |||||
|
March 31 |
Statement of Profit and Loss |
Dr. |
|
1,75,000 |
|
| To Debenture Redemption Reserve A/c | 1,75,000 | ||||
| (Surplus amount is transferred to DRR) | |||||
|
April 30 |
Debenture Redemption Investment A/c | Dr. | 2,25,000 | ||
| To Bank A/c | 2,25,000 | ||||
| (Investment is made in specified securities equal to 15% of the value of debentures redeemed) | |||||
|
Sept. 30 |
10% Debentures A/c |
Dr. |
|
15,00,000 |
|
|
|
To Debentureholders A/c |
|
|
|
15,00,000 |
|
|
(10% Debentures due for redemption) |
|
|
|
|
|
|
|
|
|
|
|
|
Sept. 30 |
Bank A/c | Dr. | 2,25,000 | ||
| To Debenture Redemption Investment A/c | 2,25,000 | ||||
| (Investment made in specified securities, now encashed) | |||||
|
Sept. 30 |
Debentureholders' A/c |
Dr. |
|
15,00,000 |
|
|
|
To Bank A/c |
|
|
|
15,00,000 |
|
|
(Amount paid to debentureholders) |
|
|
|
|
|
|
|
|
|
|
|
|
Sept. 30 |
Debenture Redemption Reserve A/c |
Dr. |
|
3,75,000 |
|
|
|
To General Reserve A/c |
|
|
|
3,75,000 |
|
|
(DRR amount is transferred to General Reserve) |
|
|
|
|
Working Notes:
| Amount for DRR (25% of Debentures Issued) = `15,00,000 xx 25/100` = | Rs 3,75,000 |
| Less : Amount already exist in DRR = | Rs 200000 |
| DRR to be created for redemption = | Rs 1,75,000 |
Investment made in Specified Securities
`= 15,00,000 xx 15/100` = Rs 2,25,000
*As per circular no. 04/2015 issued by Ministry of Corporate Affairs (dated 11.02.2013), every company required to create/maintain DRR shall on or before the 30th day of April of each year, deposit or invest, as the case may be, a sum which shall not be less than fifteen percent of the amount of its debentures maturing during the year ending on the 31st day of March next following year. Accodingly, entries for DRR and Investment have been passed a year before redemption year.
Note: Entries for interest on debentures have been ignored in the above solution as the question was silent in this regards. However, the students' may journalise the entries related to interest on debentures as given below.
Journal
|
Date |
Particular |
|
L.F. |
Debit Amount |
Credit Amount |
|
2017-18 |
|
||||
|
Mar. 31 |
Debenture Interest A/c |
Dr. |
75,000 |
||
|
|
To Debentureholders’ A/c |
|
75,000 |
||
|
|
(Interest on 10% debentures due) |
|
|||
|
|
|
||||
|
Mar. 31 |
Debentureholders’ A/c |
Dr. |
75,000 |
||
|
|
To Bank A/c |
|
75,000 |
||
|
|
(Payment of interest to debentureholders’) |
|
|||
|
|
|
||||
|
Mar. 31 |
Statement of Profit and Loss |
Dr. |
75,000 |
||
|
|
To Debenture Interest A/c |
|
75,000 |
||
|
|
(Transfer of debenture interest to Statement of Profit and Loss) |
|
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₹ 20,00,000
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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, the following balances appeared in the books of Alpha Pvt. Ltd.
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| Debenture Redemption Reserve | ₹ 5,00,000 |
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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.
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