Question

Pooja Ltd. (an unlisted company) issued 80,000, 8% debentures of ₹ 100 each on June 30, 2019 redeemable at a premium of 6% on July 1, 2023. The Board of Directors have decided to transfer out of profits ₹ 3,00,000 to Debenture Redemption Reserve on March 31, 2021, ₹ 3,00,000 on March 31, 2022 and balance on March 31, 2023. Record necessary journal entries regarding issue and redemption of debentures. Ignore entries relating to writing off loss on issue of debenture and interest paid thereon.

Answer 1

Journal entries of Pooja Ltd.
Date	Particulars	L.F.	Debit (₹)	Credit (₹)
2019
June 30	Bank A/c   ...Dr.		80,00,000	-
	To 8% Debentures A/c		-	80,00,000
	(Being 80,000 debentures of ₹100 each issued at par)
2021
March 31	Profit & Loss Appropriation A/c   ...Dr.		3,00,000	-
	To Debenture Redemption Reserve A/c		-	3,00,000
	(Being amount transferred to DRR from profits)
2022
March 31	Profit & Loss Appropriation A/c   ...Dr.		3,00,000	-
	To Debenture Redemption Reserve A/c		-	3,00,000
	(Being second transfer to DRR)
2023
March 31	Profit & Loss Appropriation A/c   ...Dr.		2,00,000	-
	To Debenture Redemption Reserve A/c		-	2,00,000
	(Being balance DRR created to complete requirement)
April 30	Debenture Redemption Investment A/c   ...Dr.		12,00,000	-
	To Bank A/c		-	12,00,000
	(Being 15% of debenture face value invested as per law)
July 1	8% Debentures A/c   ...Dr.		80,00,000	-
	Premium on Redemption A/c   ...Dr.		4,80,000	-
	To Debentureholders A/c		-	84,80,000
	(Being debentures due for redemption @6% premium)
July 1	Debentureholders A/c   ...Dr.		84,80,000	-
	To Bank A/c		-	84,80,000
	(Being payment made on redemption)
July 1	Debenture Redemption Reserve A/c   ...Dr.		8,00,000	-
	To General Reserve A/c		-	8,00,000
	(Being DRR transferred to General Reserve)

Working Note:

1. Total Debentures Issued: 80,000 × ₹ 100 = ₹ 80,00,000
2. Premium on Redemption (6%): ₹ 80,00,000 × 6% = ₹ 4,80,000
3. Debenture Redemption Reserve (10%): ₹ 80,00,000 × 10% = ₹ 8,00,000
4. Debenture Redemption Investment (15%): ₹ 80,00,000 × 15% = ₹ 12,00,000