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 ₹ 20,000 in Debenture Redemption Reserve Account?

Options

• ₹ 1,05,000

• ₹ 30,000

• ₹ 2,30,000

• ₹ 4,80,000

Answer 1

₹ 30,000

Explanation:

• Face Value of Debentures = 5,000 × ₹ 100 = ₹ 5,00,000
• Required DRR (for an unlisted company) = 10% of face value = ₹ 50,000
• Existing DRR Balance = ₹ 20,000
• Additional amount to be transferred = ₹ 50,000 − ₹ 20,000 = ₹ 30,000