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Question
| On 31st March, 2018, W Ltd. had the following balances in its books: | ₹ |
| 9% Debentures | 6,00,000 |
| Debentures Redemption Reserve | 50,000 |
| Surplus,i.e., Balance in Statement of Profit and Loss | 3,00,000 |
On that date, the company decided to transfer ₹ 1,00,000 to Debentures Redemption Reserve. It also decided to redeem debentures of ₹ 3,00,000 on 30th June, 2018.
Pass necessary Journal entries in the books of the company.
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Solution
Books of W Ltd.
Journal
|
Date. |
Particulars |
L.F. |
Debit Amount (₹) |
Credit Amount (₹) |
|
|
31/3/18 |
Statement of Profit or Loss |
Dr. |
|
1,00,000 |
|
|
|
To Debenture Redemption Reserve A/c |
|
|
1,00,000 |
|
|
|
(Surplus transferred to Debenture Redemption Reserve) |
|
|
|
|
|
|
|
|
|
|
|
| 30/4/18 | Debenture Redemption Investment A/c Dr. | 45,000 | |||
| To Bank A/c | 45,000 | ||||
| (Investment is made in specified securities equal to 15% of the value of debentures redeemed) | |||||
|
30/6/18 |
9% Debentures A/c |
Dr. |
|
3,00,000 |
|
|
|
To Debentureholders’ A/c |
|
|
3,00,000 |
|
|
|
(Debenture due for redemption) |
|
|
|
|
|
|
|
|
|
|
|
| 30/6/18 | Bank A/c Dr. | 45,000 | |||
| To Debenture Redemption Investment A/c | 45,000 | ||||
| (Investment made in specified securities is now encashed) | |||||
|
30/6/18 |
Debentureholders’ A/c |
Dr. |
|
3,00,000 |
|
|
|
To Bank A/c |
|
|
3,00,000 |
|
|
|
(Amount due to debentureholders paid) |
|
|
|
|
| 30/6/18 | Debenture Redemption Reserve A/c Dr. | 75,000 | |||
| To General Reserve A/c | 75,000 | ||||
| (50% DRR transferred to General Reserve) | |||||
Working Notes:
Investment made in Specified Securities
`= 300000 xx 15/100 = "Rs" 45000`
Note:
1. Here, the entry for transferring the amount of DRR to General Reserve A/c has been passed with 50% of DRR amount, since the company has not fully redeemed all its debentures. Therefore, 50% of DRR amount i.e. 50% of 1,50,000, transferred to General Reserve.
2. 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 |
|
2018 |
|
||||
|
Mar. 31 |
Debenture Interest A/c |
Dr. |
33,750 |
||
|
|
To Debentureholders’ A/c |
|
33,750 |
||
|
|
(Interest on 9% debentures due) |
|
|||
|
|
|
||||
|
Mar.31 |
Debentureholders’ A/c |
Dr. |
33,750 |
||
|
|
To Bank A/c |
|
33,750 |
||
|
|
(Payment of interest to debentureholders’) |
|
|||
|
|
|
||||
|
Mar. 31 |
Statement of Profit and Loss |
Dr. |
33,750 |
||
|
|
To Debenture Interest A/c |
|
33,750 |
||
|
|
(Transfer of debenture interest to Statement of Profit and Loss) |
|
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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Godrej Ltd. has 20,000; 7% Debentures of ₹ 100 each due for redemption on 31st August, 2018. There is a balance of ₹ 3,50,000 in Debentures Redemption Reserve Account as on 31st March, 2016. Investment, as required by the Companies Act, 2013 is made on 1st April, 2017 in fixed deposit bearing interest @ 6% p.a. Bank deducted TDS @ 10% on its maturity which is 31st March, 2018.
Pass Journal entries for redemption of debentures.
On 1st April, 2016, following were the balances of Blue Bird Ltd.:
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| 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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₹ 20,00,000
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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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| 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.
Shahi Ltd. decided to redeem its 8,000, 11% debentures of ₹ 100 each at a premium of 10%. The minimum amount transferred to the debenture redemption reserve will be:
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Fill in the blank.
The portion of uncalled capital to be called only in the event of winding up of the company is called ____________.
Relay Ltd. (an unlisted Non NBFC) redeems its 8,000, 10% Debentures of ₹ 100 each in instalments as follows:
| Date of Redemption | Debentures to be redeemed |
| 31st March, 2019 | 2,000 |
| 31st March, 2020 | 5,000 |
| 31st March, 2021 | 1,000 |
On the basis of the above details, what will be the amount of Debenture Redemption Reserve which the company will transfer to General Reserve on 31st March, 2021?
Jerome Ltd., an unlisted manufacturing company, had 20,000, 6% Debentures of ₹100 each due for redemption at par on 31st March, 2022. On this date the company had the required amount of ₹ 2,00,000 in its Debenture Redemption Reserve.
The Debenture Redemption Investment which was purchased on 30th April, 2021, was realised at 98% on the date of redemption and the debentures were redeemed on the due date.
You are required to pass journal entries in the books of the company for the year 2021-22. (Ignore 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)
