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Question
On 1st April, 2022, F Ltd. (an unlisted company) issued ₹ 40,00,000, 7% Debentures of ₹ 100 each at a premium of 5%, redeemable at a premium of 10% at the end of 4 years. Investment as required by law was made in fixed deposit of the bank on 30th April earning interest @ 6% p.a.
Pass journal entries at the time of Redemption of Debentures.
Journal Entry
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Solution
| Journal Entries of F Ltd. | ||||
| Date | Particulars | L.F. | Debit (₹) | Credit (₹) |
| 1. | 7% Debentures A/c ...Dr. | 40,00,000 | ||
| Premium on Redemption of Debentures A/c ...Dr. | 4,00,000 | |||
| To Debenture holders A/c | 44,00,000 | |||
| (Being debentures due for redemption with premium) | ||||
| 2. | Bank A/c ...Dr. | 6,00,000 | ||
| To Debenture Redemption Investment A/c | 6,00,000 | |||
| (Being DRI realized on maturity) | ||||
| 3. | Debentureholders A/c ...Dr. | 44,00,000 | ||
| To Bank A/c | 44,00,000 | |||
| (Being payment made to debentureholders on redemption) | ||||
Working Note:
Face value of debentures = ₹ 40,00,000
Redemption premium = 10% of ₹ 40,00,000 = ₹ 4,00,000
Total payable on redemption = ₹ 40,00,000 + ₹ 4,00,000 = ₹ 44,00,000
DRI (15%) = ₹ 6,00,000 (invested on 30th April)
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