Q 24 On 1st April, 2011, a Company made an issue of 5,000, 15% Debentures of Rs 100 each - Accountancy - Issue and Redemption of Debentures

Question

Q 24 On 1st April, 2011, a Company made an issue
of 5,000, 15% Debentures of Rs 100 each The terms of issue provided
for the redemption of Rs 1,00,000 Debentures annually, commencing
from 31st March, 2015, either by drawing at par or by purchase in
the market at the Company's option
Company invested the required amount on 30th April, 2014
On 31st March, 2015, the Company purchased for cancellation 300 of
its debentures at 95;200 at 96 and 250 at 98 The expenses of
purchase amounted to Rs 320
Record the redemption of debentures in the Company's Ledger
including interest on debentures

[Ans Debenture Redemption Investment Rs 15,000 made on 30th April,
2014 will not be encashed Profit on Redemption transferred to
Capital Reserve Rs 2,480
Note: It is assumed that the Company has sufficient balance in DRR

Neha A. · Accepted Answer

Hi Ipsita,

Please find the solution below

Journal

Date
Particulars
L F
Debit
Amount
(Rs)
Credit
Amount
(Rs)

2014

Apr 30
Debenture Redemption Investment
A/c
Dr

15,000

To Bank A/c

15,000

(15% of redeemable debentures i e Rs 1,00,000
invested)

2015

Mar 31
Debenture Interest A/c
Dr

75,000

To Debentureholders’
A/c

75,000

(Interest on 5,00,000, 15% debentures
due)

Debentureholders’ A/c
Dr

75,000

To Bank A/c

75,000

(Interest paid to
debentureholders)

Statement of Profit and Loss
Dr

75,000

To Debenture Interest A/c

75,000

(Debenture interest debited to Statement of
Profit and Loss)

Own Debentures A/c
Dr

72,520

To Bank A/c

72,520

(Debentures purchased from open
market)

15% Debentures A/c
Dr

75,000

To Own Debentures A/c

72,520

To Profit on Cancellation of Own Debentures
A/c

2,480

(Own debentures cancelled)

Profit on Cancellation of Own Debentures
A/c
Dr

2,480

To Capital Reserve A/c

2,480

(Profit on cancellation transferred to Capital
Reserve)

Working Notes

Amount debited to Own Debentures = (â€‹300*95) +
(200*96) + (250*98) + 320 = Rs 72,520

Journal
Date	Particulars		L.F.	Debit Amount (Rs)	Credit Amount (Rs)
2014
Apr 30	Debenture Redemption Investment A/c	Dr.		15,000
	To Bank A/c				15,000
	(15% of redeemable debentures i.e. Rs 1,00,000 invested)
2015
Mar 31	Debenture Interest A/c	Dr.		75,000
	To Debentureholders’ A/c				75,000
	(Interest on 5,00,000, 15% debentures due)

	Debentureholders’ A/c	Dr.		75,000
	To Bank A/c				75,000
	(Interest paid to debentureholders)

	Statement of Profit and Loss	Dr.		75,000
	To Debenture Interest A/c				75,000
	(Debenture interest debited to Statement of Profit and Loss)

	Own Debentures A/c	Dr		72,520
	To Bank A/c				72,520
	(Debentures purchased from open market)

	15% Debentures A/c	Dr.		75,000
	To Own Debentures A/c				72,520
	To Profit on Cancellation of Own Debentures A/c				2,480
	(Own debentures cancelled)

	Profit on Cancellation of Own Debentures A/c	Dr.		2,480
	To Capital Reserve A/c				2,480
	(Profit on cancellation transferred to Capital Reserve)