X Ltd. decided to redeem Rs.25,000, 12% Debentures. It purchased Rs. 20,000 debentures in the open market at Rs. 98.50 each, the expenses being Rs. 100 and redeemed the balance of Rs. 5,000 debentures by draw of lots. Journalise.

Particulars L.F. Debit
Amount
(Rs)
Credit
Amount
(Rs)
Own Debentures A/c Dr.   19,700  
            To Bank A/c       19,700
(Purchase of open debentures)        
         
12% Debentures A/c Dr.   20,000  
            To Own Debentures A/c       19,700
            To Profit on cancellation of debentures A/c       300
(Redemption of own debentures)        
         
Profit on cancellation of debentures A/c Dr.   400  
            To Capital Reserve A/c       400
(Profit on redemption transferred to capital reserve)        
         
12% Debentures A/c Dr.   5,000  
            To Debenture holders A/c       5,000
(Amount due on redemption by draw of lots)        
         
Debenture holders A/c Dr.   5,000  
            To Bank A/c       5,000
(Payment made to debenture holders)        
       

Note: It has been assumed that there was adequate an amount in Debenture Redemption Reserve.

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