Question

X Ltd. (an unlisted company) wants to redeem 5,000, 5% Debentures of ₹ 100 each at 5% premium. How much amount it must transfer to Debenture Redemption Reserve, if it has already a balance of ₹ 40,000 in Debenture Redemption Reserve Account?

Answer 1

Number of debentures = 5,000

Face value per debenture = ₹ 100

Total face value = 5,000 × ₹100 = ₹ 5,00,000

Required DRR = 10% of ₹ 5,00,000 = ₹ 50,000

Existing balance in DRR = ₹ 40,000

Amount to be transferred to DRR = ₹ 50,000 − ₹ 40,000 = ₹ 10,000