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Solution - On 1.4.2013 Jmr Ltd. Had 20,000, 9% Debentures of Rs 100 Each Outstanding (I) on 1.4.2014 the Company Purchased in the Open Market 6,000 of Its Own Debentures for Rs 98 Each and Cancelled the Same Immediately. - CBSE (Science) Class 12 - Accountancy

ConceptRedemption of Debentures for Immediate Cancellation - Draw of Lots, Lump Sum and Purchase in the Open Market

Question

On 1.4.2013 JMR Ltd. had 20,000, 9% debentures of Rs 100 each outstanding

(i) On 1.4.2014 the company purchased in the open market 6,000 of its own debentures for Rs 98 each and cancelled the same immediately.

(ii) On 28.2.2015 the company redeemed at par debentures of Rs 10, 00,000 by draw of a lot.

(iii) On 1.3.2016 the remaining debentures were purchased for immediate cancellation for Rs 3, 99,000.

Ignoring interest on debentures and debenture redemption reserve, pass necessary journal entries for the above transactions in the books of JMR Ltd.

Solution

 the books of JMR Ltd Journal

Date Particulars L.F.

Dr.

Rs

Cr.

Rs

2014
Apr 01

Own Debentures A/c                                               Dr

                       To Bank A/c

(Being purchase of 6,000 own debentures @ Rs 98 each)

 

9% Debentures A/c                                                Dr

                  To Own Debentures A/c

                 To Gain (Profit) on cancellation

(Being cancellation of own debentures)

 

Gain (Profit) on Cancellation A/c                          Dr

                To Capital Reserve A/c

(Being transfer of gain (profit) on redemption of debentures to Capital Reserve)

 

                             5,88,000

 

 

 

                             6,00,000

 

 

 

 

                                  12,000

 

 

 

 

5,88,000

 

 

 

5,88,000

12,000

 

 

 

12,000

 

2015
Feb.28

9% Debentures A/c                                              Dr

                 To Debentureholders A/c

(Being 9% Debenture due for redemption)

Debenturesholders A/c                                        Dr

To Bank A/c

(Being amount paid to debenture holders)

 

                            10,00,000

 

 

                             10,00,000

 

 

 

10,00,000

 

 

10,00,000

 

2016
Mar.01

Own Debentures A/c                                           Dr

                To Bank A/c

(Being purchase of 4,000 own debentures)

9% Debentures A/c                                             Dr

                To Own Debentures A/c

                To Gain (Profit) on Cancellation

(Being own debentures purchased and cancelled)

Gain (Profit) on Cancellation A/c                       Dr

                 To Capital Reserve A/c

(Being transfer of gain (profit) on redemption of debentures to Capital Reserve)

 

                                 3,99,00

 

 

                               4,00,000

 

 

 

                                    1,000

 

 

 

3,99,000

 

 

3,99,000

1,000

 

 

1,000

 

 

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Solution for question: On 1.4.2013 Jmr Ltd. Had 20,000, 9% Debentures of Rs 100 Each Outstanding (I) on 1.4.2014 the Company Purchased in the Open Market 6,000 of Its Own Debentures for Rs 98 Each and Cancelled the Same Immediately. concept: Redemption of Debentures for Immediate Cancellation - Draw of Lots, Lump Sum and Purchase in the Open Market. For the courses CBSE (Science), CBSE (Arts), CBSE (Commerce)
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