NCERT Solutions for Class 12 Commerce Accountancy Chapter 10

Question 1:

Star Ltd. is a manufacturer of chemical fertilisers. Its annual turnover is â‚¹ 50 crores. The company had issued 5,000, 12% Debentures of â‚¹ 500 each at par. Calculate the amount of Debentures Redemption Reserve which needs to be created to meet the requirements of law.

Answer:

$\begin{matrix} Amount required to be transferred to DRR = 25% of Face value of Debentures \\ = 25% of Rs 25,00,000 = Rs 6,25,000 \end{matrix}$

Question 2:

Young India Ltd. had issued following debentures:
(a) 1,00,000, 10% fully convertible debentures of â‚¹ 100 each on 1st April, 2016 redeemable by conversion after 5 years.
(b) 20,000, 10% Debentures of â‚¹ 100 each redeemable after 4 years , 25% Debentures in Cash and 75% by conversion.
State the amount of DRR required to be created as per the Companies Act,2013.

Answer:

(a) There is no need for creation of DRR because these debentures are fully convertible.

(b) DRR would be created for non-convertible part of debentures.

$\begin{matrix} Amount Required to be transferred to DRR = 25% of Face value of Debentures(Non-convertible) \\ = 25% of Rs 5,00,000(20,00,000 \times 25%) = ₹ 1,25,000 \end{matrix}$

Question 3:

Dow Ltd. issued â‚¹ 2,00,000; 8% Debentures of â‚¹ 10 each at a premium of 8% on 30th June, 2016 redeemable on 31st March, 2018. How much amount should be transferred to Debentures Redemption Reserve before redemption of debentures?

Answer:

Section 71 (4) of the Companies Act, 2013 requires that an amount equal to at least 25% of the value of debentures is to be transferred to the Debenture Redemption Reserve Account. Accordingly, Rs 50,000 is required to be transferred to DRR (i.e. 25% of 2,00,000) before the actual date of redemption of debentures.

Question 4:

Nirbhai Chemicals Ltd. issued â‚¹ 10,00,000; 6% Debentures of â‚¹ 50 each at a premium of 8% on 30th June, 2018 redeemable on 30th June, 2019. The issue was fully subscribed. Pass Journal entries for issue and redemption of debentures. How much amount should be transferred to Debentures Redemption Reserve before redemption of debentures? Also, state how much amount should be invested in specified securities?

Answer:

Section 71 (4) of the Companies Act, 2013 requires that an amount equal to at least 25% of the value of debentures is to be transferred to the Debenture Redemption Reserve Account. So, Rs 2, 50,000 is required to be transferred to DRR (i.e. 25% of 10,00,000). Further, Rule 18 (7) requires every company that is required to create DRR to invest an amount at least equal to 15% of the value of debentures in specified securities. So, Rs 1,50,000 is to be invested in specified securities (i.e. 15% of 10,00,000).

Journal In the Books of Nirbhai Chemicals Ltd.
Date	Particulars		L.F.	Debit Amount (â‚¹)	Credit Amount (â‚¹)
2018
June 30	Bank A/c	Dr.		10,80,000
	To 6% Debentures A/c				10,00,000
	To Securities Premium Reserve A/c				80,000
	(Debentures issued)

2019
March 31	Statement of Profit and Loss	Dr.		2,50,000
	To Debenture Redemption Reserve A/c				2,50,000
	(DRR created)

April 30	Debenture Redemption Investment A/c	Dr.		1,50,000
	To Bank A/c				1,50,000
	(Investment made in specified securities)

June 30	Bank A/c	Dr.		1,50,000
	To Debenture Redemption Investment A/c				1,50,000
	(Investments encashed)

June 30	6% Debentures A/c	Dr.		10,00,000
	To Debentureholders’ A/c				10,00,000
	(Amount on 6% debentures due)

June 30	Debentureholders’ A/c	Dr.		10,00,000
	To Bank A/c				10,00,000
	(Payment made on redemption of debentures)

June 30	Debenture Redemption Reserve A/c	Dr.		2,50,000
	To General Reserve A/c				2,50,000
	(Transfer of Debenture Redemption Reserve to General Reserve)

Note: Entries for interest on debentures have been ignored in the above solution as the question was silent in this regards. However, the students' may journalise the entries related to interest on debentures as given below.

Journal
Date	Particular		L.F.	Debit Amount (â‚¹)	Credit Amount (â‚¹)
2019
Mar. 31	Debenture Interest A/c	Dr.		45,000
	To Debentureholders’ A/c				45,000
	(Interest on 6% debentures due for 9 months)

Mar.31	Debentureholders’ A/c	Dr.		45,000
	To Bank A/c				45,000
	(Payment of interest to debentureholders’)

Mar. 31	Statement of Profit and Loss	Dr.		45,000
	To Debenture Interest A/c				45,000
	(Transfer of debenture interest to Statement of Profit and Loss)

Question 5:

Export-Import Bank of India (EXIM Bank) issued 20,000, 10% Debentures of â‚¹ 100 each through public issue and 10,000, 10% Debentures of â‚¹ 100 each through private placement . State the amount of investment to be made by EXIM Bank before redemption of debentures.

Answer:

The Companies Act, 2013 exempts Banking Companies to invest in specified securities.

Question 6:

SRCC Ltd. has issued on 1st April, 2017, 20,000, 12% Debentures of â‚¹ 100 each redeemable by draw of lots as under:

During the year ended on 31st March, 2018 : 15%
During the year ended on 31st March, 2019 : 25%
During the year ended on 31st March, 2020 : 15%
During the year ended on 31st March, 2021 : 25%
During the year ended on 31st March, 2022 : 20%

How much minimum investment should be made by SRCC Ltd. as per Companies Act, 2013 before redemption of debentures? When should it be made?

Answer:

Amount to be invested in specified securities:

Year ended on	Date of Investment	Redeemable Amount	Minimum amount of DRI
March 31, 2018	On or before 30.04.17	20,00,000 $\times$ 15% = 3,00,000	3,00,000 $\times$ 15% = 45,000
March 31, 2019	On or before 30.04.18	20,00,000 $\times$ 25% = 5,00,000	5,00,000 $\times$ 15% = 75,000
March 31, 2020	On or before 30.04.19	20,00,000 $\times$ 15% = 3,00,000	3,00,000 $\times$ 15% = 45,000
March 31, 2021	On or before 30.04.20	20,00,000 $\times$ 25% = 5,00,000	5,00,000 $\times$ 15% = 75,000
March 31, 2022	On or before 30.04.21	20,00,000 $\times$ 20% = 4,00,000	4,00,000 $\times$ 15% = 60,000

Question 7:

IFCI Ltd.(An All India Financial Institution) issued 10,00,000; 9% Debentures of â‚¹ 50 each on 1st April, 2011 redeemable on 1st April, 2019. How much amount of Debentures Redemption Reserve is required before the redemption of debentures? Also, pass Journal entries for issue and redemption of debentures.

Answer:

Books of IFCI Ltd.
Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
2011
April 01	Bank A/c	Dr.		5,00,00,000
	To 9% Debenture Application A/c				5,00,00,000
	(Debenture application money received)

April 01	9% Debenture Application A/c	Dr.		5,00,00,000
	To 9% Debentures A/c				5,00,00,000
	(Debenture application money transferred to debenture account)

2017
April 01	9% Debentures A/c	Dr.		5,00,00,000
	To Debentureholders’ A/c				5,00,00,000
	(Debentures due for redemption)

April 01	Debentureholders’ A/c	Dr.		5,00,00,000
	To Bank A/c				5,00,00,000
	(Amount due for redemption paid to debenture holders)

Notes:
1. All India Financial Institutions are exempted from creating DRR. Hence, in this case, no DRR is to be created.
2. Entries for interest on debentures have been ignored in the above solution as the question was silent in this regards. However, the students' may journalise the entries related to interest on debentures every year from April 01, 2011 to March 31, 2017 as given below.

Journal
Date	Particulars		L.F.	Debit Amount (Rs)	Credit Amount (Rs)
2011
Mar. 31	Debenture Interest A/c	Dr.		45,00,000
	To Debentureholders’ A/c				45,00,000
	(Interest on 9% debentures due)

Mar.31	Debentureholders’ A/c	Dr.		45,00,000
	To Bank A/c				45,00,000
	(Payment of interest to debentureholders’)

Mar. 31	Statement of Profit and Loss	Dr.		45,00,000
	To Debenture Interest A/c				45,00,000
	(Transfer of debenture interest to Statement of Profit and Loss)

Question 8:

On 31st March, 2003, G Ltd. had â‚¹ 8,00,000;9% Debentures due for redemption. The company had a balance of â‚¹ 1,40,000 in its Debentures Redemption Reserve . Pass necessary journal entries for redemption of debentures.

Answer:

Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
31/3/2002*	Statement of Profit or Loss	Dr.		60,000
	To Debenture Redemption Reserve A/c				60,000
	(Surplus amount is transferred to DRR)

30/4/2002*	Debenture Redemption Investment A/c Dr.			1,20,000
	To Bank A/c				1,20,000
	(Investment is made in specified securities equal to 15% of the value of debentures redeemed)

31/3/2003	9% Debentures A/c	Dr.		8,00,000
	To Debentureholders’ A/c				8,00,000
	(Debentures due for redemption)

31/3/2003	Bank A/c Dr.			1,20,000
	To Debenture Redemption Investment A/c				1,20,000
	(Investment made in specified securities is now encashed)

31/3/2003	Debentureholders’ A/c	Dr.		8,00,000
	To Bank A/c				8,00,000
	(Amount paid to debentureholders)

31/3/2003	Debenture Redemption Reserve A/c	Dr.		2,00,000
	To General Reserve				2,00,000
	(DRR transferred to General Reserve)

Working Note:

Notes:

1. Interest is not calculated on Investment as rate of interest is not provided.
2. Entries for interest on debentures have been ignored in the above solution as the question was silent in this regards. However, the students' may journalise the entries related to interest on debentures for the years ending March 31, 2002 and March 31, 2003 as given below.

Journal
Date	Particulars		L.F.	Debit Amount (Rs)	Credit Amount (Rs)
2002
Mar. 31	Debenture Interest A/c	Dr.		72,000
	To Debentureholders’ A/c				72,000
	(Interest on 9% debentures due)

Mar. 31	Debentureholders’ A/c	Dr.		72,000
	To Bank A/c				72,000
	(Payment of interest to debentureholders’)

Mar. 31	Statement of Profit and Loss	Dr.		72,000
	To Debenture Interest A/c				72,000
	(Transfer of debenture interest to Statement of Profit and Loss)

*As per circular no. 04/2015 issued by Ministry of Corporate Affairs (dated 11.02.2013), every company required to create/maintain DRR shall on or before the 30th day of April of each year, deposit or invest, as the case may be, a sum which shall not be less than fifteen percent of the amount of its debentures maturing during the year ending on the 31st day of March next following year. Accodingly, entries for DRR and Investment have been passed in the previous accounting year.

Question 9:

On 31st March, 2018, W Ltd. had the following balances in its books:	â‚¹
9% Debentures	6,00,000
Debentures Redemption Reserve	50,000
Surplus,i.e., Balance in Statement of Profit and Loss	3,00,000

On that date, the company decided to transfer â‚¹ 1,00,000 to Debentures Redemption Reserve. It also decided to redeem debentures of â‚¹ 3,00,000 on 30th June, 2018.

Pass necessary Journal entries in the books of the company.

Answer:

Books of W Ltd.
Journal
Date.	Particulars		L.F.	Debit Amount (â‚¹)	Credit Amount (â‚¹)
31/3/18	Statement of Profit or Loss	Dr.		1,00,000
	To Debenture Redemption Reserve A/c				1,00,000
	(Surplus transferred to Debenture Redemption Reserve)

30/4/18	Debenture Redemption Investment A/c Dr.			45,000
	To Bank A/c				45,000
	(Investment is made in specified securities equal to 15% of the value of debentures redeemed)

30/6/18	9% Debentures A/c	Dr.		3,00,000
	To Debentureholders’ A/c				3,00,000
	(Debenture due for redemption)

30/6/18	Bank A/c Dr.			45,000
	To Debenture Redemption Investment A/c				45,000
	(Investment made in specified securities is now encashed)

30/6/18	Debentureholders’ A/c	Dr.		3,00,000
	To Bank A/c				3,00,000
	(Amount due to debentureholders paid)

30/6/18	Debenture Redemption Reserve A/c Dr.			75,000
	To General Reserve A/c				75,000
	(50% DRR transferred to General Reserve)

Working Notes:

Note:
1. Here, the entry for transferring the amount of DRR to General Reserve A/c has been passed with 50% of DRR amount, since the company has not fully redeemed all its debentures. Therefore, 50% of DRR amount i.e. 50% of 1,50,000, transferred to General Reserve.
2. Entries for interest on debentures have been ignored in the above solution as the question was silent in this regards. However, the students' may journalise the entries related to interest on debentures as given below.

Journal
Date	Particular		L.F.	Debit Amount (â‚¹)	Credit Amount (â‚¹)
2018
Mar. 31	Debenture Interest A/c	Dr.		33,750
	To Debentureholders’ A/c				33,750
	(Interest on 9% debentures due)

Mar.31	Debentureholders’ A/c	Dr.		33,750
	To Bank A/c				33,750
	(Payment of interest to debentureholders’)

Mar. 31	Statement of Profit and Loss	Dr.		33,750
	To Debenture Interest A/c				33,750
	(Transfer of debenture interest to Statement of Profit and Loss)

Question 10:

Mansi Ltd. had 6,000; 10% Debentures of â‚¹ 100 each due for redemption on 31st March, 2019. Assuming that the debentures were redeemed out of profits, pass necessary Journal entries for the redemption of debentures. There was a credit balance of â‚¹ 6,00,000 in Surplus, i.e., Balance in Statement of Profit and Loss.

Answer:

Journal
Date	Particulars			L.F.	Debit Amount (â‚¹)	Credit Amount (â‚¹)
2018
March 31	Statement of Profit and Loss*	Dr.			6,00,000
	To Debenture Redemption Reserve A/c					6,00,000
	(Surplus amount is transferred to Debenture Redemption Reserve)

April 30	Debenture Redemption Investment A/c**		Dr.		90,000
	To Bank A/c					90,000
	(Investment is made in specified securities equal to 15% of the value of debentures redeemed)
2019
March 31	10% Debentures A/c	Dr.			6,00,000
	To Debentureholders’ A/c					6,00,000
	(Debenture due for redemption)

March 31	Bank A/c		Dr.		90,000
	To Debenture Redemption Investment A/c					90,000
	(Investment made in securities, now encashed)

March 31	Debentureholders’ A/c	Dr.			6,00,000
	To Bank A/c	Dr.				6,00,000
	(Payment made to debentureholders)

March 31	Debenture Redemption Reserve A/c	Dr.			6,00,000
	To General Reserve A/c					6,00,000
	(Debenture Redemption Reserve transferred to General Reserve)

*In case of redemption of debentures by profits, 100% of the nominal value of debentures is transferred to DRR A/c.

**As per circular no. 04/2015 issued by Ministry of Corporate Affairs (dated 11.02.2013), every company required to create/maintain DRR shall on or before the 30th day of April of each year, deposit or invest, as the case may be, a sum which shall not be less than fifteen percent of the amount of its debentures maturing during the year ending on the 31st day of March next following year. Accordingly, entries for DRR and Investment have been passed in the previous accounting year.

Note: Entries for interest on debentures have been ignored in the above solution as the question was silent in this regards. However, the students' may journalise the entries related to interest on debentures as given below.

Journal
Date	Particular		L.F.	Debit Amount (â‚¹)	Credit Amount (â‚¹)
2018 & 2019
Mar. 31	Debenture Interest A/c	Dr.		60,000
	To Debentureholders’ A/c				60,000
	(Interest on 10% debentures due)

Mar. 31	Debentureholders’ A/c	Dr.		60,000
	To Bank A/c				60,000
	(Payment of interest to debentureholders’)

Mar. 31	Statement of Profit and Loss	Dr.		60,000
	To Debenture Interest A/c				60,000
	(Transfer of debenture interest to Statement of Profit and Loss)

Question 11:

India Textiles Corporation Ltd. has outstanding â‚¹ 50,00,000; 9% Debentures of â‚¹ 100 each due for redemption on 31st July, 2019. Pass Journal entries for redemption assuming that there is a balance of â‚¹ 3,00,000 in Debentures Redemption Reserve on the date of redemption.

Answer:

Books of India Textiles Corporation Ltd.
Journal
Date	Particulars		L.F.	Debit Amount (â‚¹)	Credit Amount (â‚¹)
2019	Statement of Profit and Loss	Dr.		9,50,000
March 31	To Debenture Redemption Reserve A/c				9,50,000
	(Profit transferred to Debenture Redemption Reserve)

April 30	Debenture Redemption Investment A/c	Dr.		7,50,000
	To Bank A/c				7,50,000
	(Investment is made in specified securities equal to the 15% value of debentures redeemed)
2019
July 31	9% Debentures A/c	Dr.		50,00,000
	To Debentureholders’ A/c				50,00,000
	(Debentures due for redemption)

July 31	Bank A/c	Dr.		7,50,000
	To Debenture Redemption Investment A/c				7,50,000
	(Investment made in securities is now encashed)

July 31	Debentureholders’ A/c	Dr.		50,00,000
	To Bank A/c				50,00,000
	(Payment made to debentureholders)

July 31	Debenture Redemption Reserve A/c	Dr.		12,50,000
	To General Reserve A/c				12,50,000
	(Debenture Redemption Reserve transferred to General Reserve)

Working Notes:

WN1: Calculation of amount transferred to DRR

WN2: Calculation of amount Invested in Specified Securities

*As per circular no. 04/2015 issued by Ministry of Corporate Affairs (dated 11.02.2013), every company required to create/maintain DRR shall on or before the 30th day of April of each year, deposit or invest, as the case may be, a sum which shall not be less than fifteen percent of the amount of its debentures maturing during the year ending on the 31st day of March next following year. Accordingly, entries for DRR and Investment have been passed in the previous accounting year.

Note: Entries for interest on debentures have been ignored in the above solution as the question was silent in this regards. However, the students' may journalise the entries related to interest on debentures as given below.

Journal
Date	Particular		L.F.	Debit Amount (â‚¹)	Credit Amount (â‚¹)
2019
Mar. 31	Debenture Interest A/c	Dr.		1,50,000
	To Debentureholders’ A/c				1,50,000
	(Interest on 9% debentures due)

Mar. 31	Debentureholders’ A/c	Dr.		1,50,000
	To Bank A/c				1,50,000
	(Payment of interest to debentureholders’)

Mar. 31	Statement of Profit and Loss	Dr.		1,50,000
	To Debenture Interest A/c				1,50,000
	(Transfer of debenture interest to Statement of Profit and Loss)

Question 12:

Manish Ltd. issued â‚¹ 40,00,000; 8% Debentures of â‚¹ 100 each on 1st April, 2017. The terms of issue stated that the debentures are to be redeemed at a premium of 5% on 30th June, 2019. The company decided to transfer â‚¹ 10,00,000 out of profits to Debentures Redemption Reserve on 31st March, 2018 and â‚¹ 10,00,000 on 31st March, 2019.
Pass Journal entries regarding the issue and redemption of debentures, DRR and Investment without providing for the interest or loss on issue of debentures.

Answer:

Journal
Date	Particulars		L.F.	Debit Amount (â‚¹)	Credit Amount (â‚¹)
2017
April 01	Bank A/c	Dr.		40,00,000
	To Debenture Application A/c				40,00,000
	(Debenture application money received)

	Debenture Application A/c	Dr.		40,00,000
	Loss on Issue of Debentures A/c	Dr.		2,00,000
	To 8% Debentures A/c				40,00,000
	To Premium on Redemption of Debenture				2,00,000
	(Debenture issued with the term repayable at 5% premium)

2018
March, 31	Statement of Profit and Loss (See Note 1)	Dr.		10,00,000
	To Debenture Redemption Reserve A/c				10,00,000
	(Surplus amount is transferred to Debenture Redemption Reserve)

2019
March 31	Statement of Profit and Loss (See Note 1)	Dr.		10,00,000
	To Debenture Redemption Reserve A/c				10,00,000
	(Surplus amount is transferred to Debenture Redemption Reserve)

April 30	Debenture Redemption Investment A/c (See Note 2)	Dr.		6,00,000
	To Bank A/c				6,00,000
	(Investment is made in specified securities equal to 15% of the value of debentures redeemed)

June 30	8% Debentures A/c	Dr.		40,00,000
	Premium on Redemption of Debenture A/c	Dr.		2,00,000
	To Debentureholders’ A/c				42,00,000
	(Debenture due for redemption along with premium)

June 30	Bank A/c	Dr.		6,00,000
	To Debenture Redemption Investment A/c				6,00,000
	(Investment made in securities, now encashed)

June 30	Debentureholders’ A/c	Dr.		42,00,000
	To Bank A/c				42,00,000
	(Amount paid to Debentureholders)

June 30	Debenture Redemption Reserve A/c	Dr.		20,00,000
	To General Reserve A/c				20,00,000
	(Debenture Redemption Reserve transferred to General Reserve)

Note:

1. As prescribed by Section 71(4) of the Companies Act, 2013, companies are required to create DRR at 25% of the total value of debentures. However, it purely depends upon a company and its discretion to transfer more amount to DRR than the prescribed amount of 25% in the case of companies for whom it is mandatory to create DRR out of profits. In this case, as explicitly specified about company's discretion, DRR has been created for a total of Rs 20,00,000 which is 50% of the total value of redeemable debentures.

2. As per circular no. 04/2015 issued by Ministry of Corporate Affairs (dated 11.02.2013), every company required to create/maintain DRR shall on or before the 30th day of April of each year, deposit or invest, as the case may be, a sum which shall not be less than fifteen percent of the amount of its debentures maturing during the year ending on the 31st day of March next following year. Accordingly, entries for DRR and Investment have been passed in the previous accounting year.

3. As explicilty stated in the question, entries for interest on debentures has not been passed.

Question 13:

Godrej Ltd. has 20,000; 7% Debentures of â‚¹ 100 each due for redemption on 31st August, 2018. There is a balance of â‚¹ 3,50,000 in Debentures Redemption Reserve Account as on 31st March, 2016. Investment, as required by the Companies Act, 2013 is made on 1st April, 2017 in fixed deposit bearing interest @ 6% p.a. Bank deducted TDS @ 10% on its maturity which is 31st March, 2018.
Pass Journal entries for redemption of debentures.

Answer:

Journal In the Books of Godrej Ltd.
Date	Particulars		L.F.	Debit Amount (â‚¹)	Credit Amount (â‚¹)
2017
Apr. 01	Debenture Redemption Investment A/c	Dr.		3,00,000
	To Bank A/c				3,00,000
	(Investment made in specified securities)
2018
Mar. 31	Bank A/c (3,00,000 + 16,200)	Dr.		3,16,200
	Tax Payable A/c	Dr.		1,800
	To Interest on Debenture Redemption Investment A/c				18,000
	To Debenture Redemeption Investment A/c				3,00,000
	(Investment encashed and interest received)

Mar. 31	Statement of Profit & Loss A/c	Dr.		1,50,000
	To Debenture Redemption Reserve A/c				1,50,000
	(DRR created)

Aug. 31	7% Debentures A/c	Dr.		20,00,000
	To Debentureholders' A/c				20,00,000
	(Amount on 7% debentures due)

Aug. 31	Debentureholders' A/c	Dr.		20,00,000
	To Bank A/c				20,00,000
	(Payment made on redemption of debentures)

Aug. 31	Debenture Redemption Reserve A/c	Dr.		5,00,000
	To General Reserve A/c				5,00,000
	(Transfer of Debenture Redemption Reserve to General Reserve)

Working Notes:

Calculation of amount transferred to DRR

$Amount of DRR (25 % of Debentures) = 20, 00, 000 \times \frac{25}{100} = 5, 00, 000 Less : Amount already exists in DRR 3, 50, 000 DRR to be created for redemption 1, 50, 000$

Note:

1. The year of transfer to DRR and investment has been assumed to be in 2014 in order to maintain consistency with the guidelines issued by Ministry of Corporate Affairs which requires that every company required to create/maintain DRR shall on or before the 30th day of April of each year, deposit or invest, as the case may be, a sum which shall not be less than fifteen percent of the amount of its debentures maturing during the year ending on the 31st day of March next following year. Accordingly, entries for DRR and investment if passed in any of the year then redemption would take place in the following year.

Question 14:

Apollo Ltd.issued 21,000; 8% Debentures of â‚¹ 100 each on 1st April, 2013 redeemable at a premium of 8% on 30th June, 2019. The company decided to transfer the required amount to Debentures Redemption Reserve in three equal annual instalments starting with 31st March, 2017. Required investment was made in Government Securities on 30th April, 2019. Ignore interest on debentures and also investment.
Pass necessary Journal entries regarding issue, transfer to DRR, investment, and redemption of debentures.

Answer:

Books of Apollo Ltd. Journal
Date	Particulars		L.F.	Debit Amount (â‚¹)	Credit Amount (â‚¹)
2013
April 01	Bank A/c	Dr.		21,00,000
	To 8% Debenture Application A/c				21,00,000
	(Debenture application money received)

	8% Debenture Application A/c	Dr.		21,00,000
	Loss on Issue of Debentures A/c	Dr.		1,68,000
	To 8% Debentures A/c				21,00,000
	To Premium on Redemption A/c				1,68,000
	(21,000 8% Debentures of Rs 100 each issued with the term repayable at 8% Premium)

2017
March 31	Statement of Profit and Loss	Dr.		1,75,000
	To Debenture Redemption Reserve A/c				1,75,000
	(Profit transferred to Debenture Redemption Reserve)

2018
March 31	Statement of Profit and Loss	Dr.		1,75,000
	To Debenture Redemption Reserve A/c				1,75,000
	(Profit transferred to Debenture Redemption Reserve)

2019
Mach 31	Statement of Profit and Loss	Dr.		1,75,000
	To Debenture Redemption Reserve A/c				1,75,000
	(Profit transferred to Debenture Redemption Reserve)

April 30	Debenture Redemption Investment A/c	Dr.		3,15,000
	To Bank A/c				3,15,000
	(Investment is made in government securities equal to 15% of the value of debentures redeemed)

June 30	8% Debenture A/c	Dr.		21,00,000
	Premium on Redemption Reserve A/c	Dr.		1,68,000
	To Debentureholders’ A/c				22,68,000
	(Debenture due for redemption along with premium)

	Bank A/c	Dr.		3,15,000
	To Debenture Redemption Investment A/c				3,15,000
	(Investment made in specifed securities now encashed)

	Debentureholders’ A/c	Dr.		22,68,000
	To Bank A/c				22,68,000
	(Payment made to debentureholders)

	Debenture Redemption Reserve A/c	Dr.		5,25,000
	To General Reserve A/c				5,25,000
	(Debenture Redemption Reserve transferred to General Reserve)

Working Note:

Calculation of Amount transferred to DRR

As prescribed by Section 71(4) of the Companies Act, 2013, companies are required to create DRR at 25% of the total value of debentures. Here, debentures worth Rs 21,00,000 are to be redeemed, so, the amount of DRR will be:

Note:R to be created =6,00,000 × 25100=Rs 1,50,000
1. As per circular no. 04/2015 issued by Ministry of Corporate Affairs (dated 11.02.2013), every company required to create/maintain DRR shall on or before the 30th day of April of each year, deposit or invest, as the case may be, a sum which shall not be less than fifteen percent of the amount of its debentures maturing during the year ending on the 31st day of March next following year. Accordingly, entries for DRR and Investment have been passed in the previous accounting year.

Question 15:

On 1st April, 2016, following were the balances of Blue Bird Ltd.:

10% Debentures (redeemable on 30th September, 2017)	â‚¹ 15,00,000
Debentures Redemption Reserve	â‚¹ 2,00,000

The company met the requirements of the Companies Act, 2013 regarding Debentures Redemption Reserve and Investment and redeemed the debentures.

Pass necessary Journal entries for the above transactions in the books of the company.

Answer:

Journal
Date	Particulars		L.F.	Debit Amount (â‚¹)	Credit Amount (â‚¹)
2017
March 31	Statement of Profit and Loss	Dr.		1,75,000
	To Debenture Redemption Reserve A/c				1,75,000
	(Surplus amount is transferred to DRR)

April 30	Debenture Redemption Investment A/c	Dr.		2,25,000
	To Bank A/c				2,25,000
	(Investment is made in specified securities equal to 15% of the value of debentures redeemed)

Sept. 30	10% Debentures A/c	Dr.		15,00,000
	To Debentureholders A/c				15,00,000
	(10% Debentures due for redemption)

Sept. 30	Bank A/c	Dr.		2,25,000
	To Debenture Redemption Investment A/c				2,25,000
	(Investment made in specified securities, now encashed)

Sept. 30	Debentureholders' A/c	Dr.		15,00,000
	To Bank A/c				15,00,000
	(Amount paid to debentureholders)

Sept. 30	Debenture Redemption Reserve A/c	Dr.		3,75,000
	To General Reserve A/c				3,75,000
	(DRR amount is transferred to General Reserve)

Working Notes:

*As per circular no. 04/2015 issued by Ministry of Corporate Affairs (dated 11.02.2013), every company required to create/maintain DRR shall on or before the 30th day of April of each year, deposit or invest, as the case may be, a sum which shall not be less than fifteen percent of the amount of its debentures maturing during the year ending on the 31st day of March next following year. Accodingly, entries for DRR and Investment have been passed a year before redemption year.

Note: Entries for interest on debentures have been ignored in the above solution as the question was silent in this regards. However, the students' may journalise the entries related to interest on debentures as given below.

Journal
Date	Particular		L.F.	Debit Amount (â‚¹)	Credit Amount (â‚¹)
2017-18
Mar. 31	Debenture Interest A/c	Dr.		75,000
	To Debentureholders’ A/c				75,000
	(Interest on 10% debentures due)

Mar. 31	Debentureholders’ A/c	Dr.		75,000
	To Bank A/c				75,000
	(Payment of interest to debentureholders’)

Mar. 31	Statement of Profit and Loss	Dr.		75,000
	To Debenture Interest A/c				75,000
	(Transfer of debenture interest to Statement of Profit and Loss)

Question 16:

Mahima Ltd.issued â‚¹ 38,00,000, 9% Debentures of â‚¹ 100 each on 1st April, 2013. The debentures were redeemable at a premium of 5% on 30th June, 2015. The company transferred an amount of â‚¹ 9,50,000 to Debentures Redemption Reserve on 31st March, 2015. Investments as required by law were made in fixed deposit of a bank on 1st April, 2015.
Ignoring interest on fixed deposit ,pass necessary journal entries starting from 31st March, 2015 regarding redemption of debentures .

Answer:

Journal
Date	Particulars		L.F.	Debit Amount (Rs)	Credit Amount (Rs)
2015
Mar.31	Surplus i.e., Balance in Statement of Profit & Loss A/c	Dr.		9,50,000
	To Debentures Redemption Reserve A/c				9,50,000
	(Amount transferred to DRR)

Apr.01	Debenture Redemption Investment A/c	Dr.		5,70,000
	To Bank A/c				5,70,000
	(Amount invested in specified security)

June.30	Bank A/c	Dr.		5,70,000
	To Debenture Redemption Investment A/c				5,70,000
	(Debenture Redemption Investment realized)

June.30	9% Debenture A/c	Dr.		38,00,000
	Premium on Redemption of Debenture A/c	Dr.		1,90,000
	To Debenture holder’s A/c				39,90,000
	(Debenture due for redemption)

June.30	Debenture holder’s A/c	Dr.		39,90,000
	To Bank A/c				39,90,000
	(Debentures redeemed)

June.30	Debentures Redemption Reserve A/c Dr.			9,50,000
	To General Reserve A/c				9,50,000
	(Debentures Redemption Reserve transferred to General Reserve)

Working Note:

Amount required to be transferred to DRR = 25% of Face Value of Debentures

= 25% of Rs 38,00,000 = Rs 9,50,000

Amount required to be transferred to DRI = 15% of Face Value of Debentures

= 15% of Rs 38,00,000 = Rs 5,70,000

Question 17:

On 1st April, 2013 the following balances appeared in the books of Blue and Green Ltd.:
12%Debentures (Redeemable on 31st August, 2015) â‚¹ 20,00,000
Debentures Redemption Reserve â‚¹ 2,00,000.
The company met the requirements of Companies Act, 2013 regarding Debentures Redemption Reserve and Debentures Redemption Investments and redeemed the debentures.
Ignoring interest on investments, pass necessary journal entries for the above transactions in the books of company.

Answer:

Journal
Date	Particulars		L.F.	Debit Amount (Rs)	Credit Amount (Rs)
2015
Mar.31	Surplus i.e., Balance in statement of Profit & Loss A/c	Dr.		3,00,000
	To Debentures Redemption Reserve A/c				3,00,000
	(Amount transferred to DRR)

Apr.30	Debenture Redemption Investment A/c	Dr.		3,00,000
	To Bank A/c				3,00,000
	(Amount invested in specified security)

Aug.31	Bank A/c	Dr.		3,00,000
	To Debenture Redemption Investment A/c				3,00,000
	(Debenture Redemption Investment realized)

Aug.31	9% Debenture A/c	Dr.		20,00,000
	To Debenture holder’s A/c				20,00,000
	(Debenture due for redemption)

Aug.31	Debenture holder’s A/c	Dr.		20,00,000
	To Bank A/c				20,00,000
	(Debentures redeemed)

Aug.31	Debentures Redemption Reserve A/c Dr.			5,00,000
	To General Reserve A/c				5,00,000
	(Debentures Redemption Reserve transferred to General Reserve)

Working Notes:

Amount required to be transferred to DRR = 25% of Face Value of Debentures

= 25% of Rs 20,00,000 = Rs 5,00,000

Existing Balance in DRR = Rs 2,00,000

Therefore, Amount transferred to DRR = Rs 5,00,000 – 2,00,000 = Rs 3,00,000

Amount required to be transferred to DRI = 15% of Face Value of Debentures

= 15% of Rs 20,00,000 = Rs 3,00,000

Question 18:

Rich sugar Ltd. issued â‚¹ 20 Lakh,8% Debentures divided into debentures of â‚¹ 100 each on 1st April, 2013, redeemable in four equal annual installments starting from 31st March,2016. The company decided to transfer to Debentures Redemption Reserve â‚¹ 2,50,000 each year on 31st March,2014 and 2015.
The company invested â‚¹ 3,00,000 in Government securities as required by the Companies Act, 2013.
Pass necessary journal entries for the above transactions.

Answer:

Books of Rich Sugar Ltd. Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
2013
April 01	Bank A/c	Dr.		20,00,000
	To 8% Debenture Application A/c				20,00,000
	(Debenture application money received)

April 01	8% Debenture Application A/c	Dr.		20,00,000
	To 8% Debentures A/c				20,00,000
	(Debenture application transferred to 8% Debentures account)

2014
March 31	Statement of Profit and Loss	Dr.		2,50,000
	To Debenture Redemption Reserve A/c				2,50,000
	(Surplus amount is transferred to Debenture Redemption Reserve)

2015
March 31	Statement of Profit and Loss	Dr.		2,50,000
	To Debenture Redemption Reserve A/c				2,50,000
	(Surplus amount is transferred to Debenture Redemption Reserve)

April 30	Debenture Redemption Investment A/c	Dr.		3,00,000
	To Bank A/c				3,00,000
	(Investment is made in securities equal to 15% of the value of debentures redeemed)
2016
March 31	8% Debentures A/c	Dr.		5,00,000
	To Debentureholders’A/c				5,00,000
	(Debentures due for redemption)

March 31	Debentureholders’ A/c	Dr.		5,00,000
	To Bank A/c				5,00,000
	(Amount of debentures paid to debentureholders)

March 31	Debenture Redemption Reserve A/c Dr.			1,25,000
	To General Reserve				1,25,000
	(Debenture Redemption Reserve transferred to General Reserve)
2017
March 31	8% Debentures A/c	Dr.		5,00,000
	To Debentureholders’ A/c				5,00,000
	(Debentures due for redemption)

March 31	Debentureholders’ A/c	Dr.		5,00,000
	To Bank A/c				5,00,000
	(Amount of debentures paid to debentureholders)

March 31	Debenture Redemption Reserve A/c Dr.			1,25,000
	To General Reserve				1,25,000
	(Debenture Redemption Reserve transferred to General Reserve)

2018
March 31	8% Debentures A/c	Dr.		5,00,000
	To Debentureholders’ A/c				5,00,000
	(Debentures due for redemption)

March 31	Debentureholders’ A/c	Dr.		5,00,000
	To Bank A/c				5,00,000
	(Amount of debentures paid to debentureholders)

March 31	Debenture Redemption Reserve A/c Dr.			1,25,000
	To General Reserve				1,25,000
	(Debenture Redemption Reserve transferred to General Reserve)

2019
March 31	8% Debentures A/c	Dr.		5,00,000
	To Debentureholders’ A/c				5,00,000
	(Debenture due for redemption)

March 31	Debentureholders’ A/c	Dr.		5,00,000
	To Bank A/c				5,00,000
	(Amount of debentures paid to debentureholders)

March 31	Bank A/c	Dr.		3,00,000
	To Debenture Redemption Investment A/c				3,00,000
	(Investment made in securities, now encashed)

March 31	Debenture Redemption Reserve A/c	Dr.		1,25,000
	To General Reserve A/c				1,25,000
	(Debenture Redemption Reserve transferred to General Reserve)

*As per circular no. 04/2015 issued by Ministry of Corporate Affairs (dated 11.02.2013), every company required to create/maintain DRR shall on or before the 30th day of April of each year, deposit or invest, as the case may be, a sum which shall not be less than fifteen percent of the amount of its debentures maturing during the year ending on the 31st day of March next following year. Accodingly, entry for investment in Government securities has been passed a year before first redemption year.

Note: Since the question is silent regarding the payment of interest, the following entries may be passed at the end of every year (i.e. on 31 March before the redemption of debentures). However, it is not essential to pass these entries unless explicitly stated in the question.

Debenture Interest A/c	Dr.	Interest Rate $\times$ Amt. of Debentures outstanding
To Debentureholders’ A/c
(Interest due)

Debentureholders’ A/c	Dr.
To Bank A/c
(Payment of interest to debentureholders’)
		With the total amount of interest paid in a year
Statement of Profit and Loss	Dr.
To Debenture Interest A/c
(Transfer of debenture interest to Statement of Profit and Loss)

Question 19:

Hp Ltd. has 1,00,000;8% Debentures of â‚¹ 50 each due for redemption in five equal annual installments starting from 30th June, 2015. Debentures Redemption Reserve has a balnce of â‚¹ 5,00,000 on that date . Pass journal entries.

Answer:

Books of HP Ltd.
Journal
Date	Particulars				L.F.	Debit Amount Rs	Credit Amount Rs
2015
March 31	Statement of Profit and Loss		Dr.			7,50,000
	To Debenture Redemption Reserve						7,50,000
	(Surplus amount is transferred to Debenture Redemption Reserve)

April 30	Debenture Redemption Investment A/c*			Dr.		1,50,000
		To Bank A/c					1,50,000
	(Investment is made in specified securities @ 15% of the value of debentures redeemable in first instalment, i.e. Rs 10,00,000)

June 30	8% Debenture A/c		Dr.			10,00,000
	To Debentureholders’ A/c						10,00,000
	(20,000 8% Debenture of Rs 50 each due for redemption)

June 30	Bank A/c			Dr.		1,50,000
	To Debenture Redemption Investment A/c**						1,50,000
	(Investment made in securities, now encashed)

June 30	Debentureholders’ A/c		Dr.			10,00,000
	To Bank A/c						10,00,000
	(Payment made to debentureholders)

June 30	Debenture Redemption Reserve A/c Dr.					2,50,000
	To General Reserve						2,50,000
	(Debenture Redemption Reserve transferred to General Reserve)

2016
April 30	Debenture Redemption Investment A/c*			Dr.		1,50,000
	To Bank A/c						1,50,000
	(Investment is made in specified securities @ 15% of the value of debentures redeemable in second instalment, i.e. Rs 10,00,000)

June 30	8% Debentures A/c		Dr.			10,00,000
	To Debentureholders’ A/c						10,00,000
	(20,000 8% Debenture of Rs 50 each due for redemption)

June 30	Bank A/c			Dr.		1,50,000
	To Debenture Redemption Investment A/c**						1,50,000
	(Investment made in securities, now encashed)

June 30	Debentureholders’ A/c		Dr.			10,00,000
	To Bank A/c						10,00,000
	(Payment made to debenture holders)

June 30	Debenture Redemption Reserve A/c Dr.					2,50,000
	To General Reserve						2,50,000
	(Debenture Redemption Reserve transferred to General Reserve)

2017
April 30	Debenture Redemption Investment A/c*			Dr.		1,50,000
	To Bank A/c						1,50,000
	(Investment is made in specified securities @ 15% of the value of debentures redeemable in third instalment, i.e. Rs 10,00,000)

June 30	8% Debentures A/c		Dr.			10,00,000
	To Debentureholders’ A/c						10,00,000
	(20,000 8% Debenture of Rs 50 each due for redemption)

June 30	Bank A/c			Dr.		1,50,000
	To Debenture Redemption Investment A/c**						1,50,000
	(Investment made in securities, now encashed)

June 30	Debentureholders’ A/c					10,00,000
	To Bank A/c						10,00,000
	(Payment made to debentureholders)

June 30	Debenture Redemption Reserve A/c Dr.					2,50,000
	To General Reserve						2,50,000
	(Debenture Redemption Reserve transferred to General Reserve)

2018
April 30	Debenture Redemption Investment A/c*			Dr.		1,50,000
	To Bank A/c						1,50,000
	(Investment is made in specified securities @ 15% of the value of debentures redeemable in fourth instalment, i.e. Rs 10,00,000)

June 30	8% Debentures A/c		Dr.			10,00,000
	To Debentureholders’ A/c						10,00,000
	(20,000 8% Debenture of Rs 50 each due for redemption)

June 30	Bank A/c			Dr.		1,50,000
	To Debenture Redemption Investment A/c**						1,50,000
	(Investment made in securities, now encashed)

June 30	Debentureholders’ A/c		Dr.			10,00,000
	To Bank A/c						10,00,000
	(Payment made to debentureholders)

June 30	Debenture Redemption Reserve A/c Dr.					2,50,000
	To General Reserve						2,50,000
	(Debenture Redemption Reserve transferred to General Reserve)

2019
April 30	Debenture Redemption Investment A/c*			Dr.		1,50,000
	To Bank A/c						1,50,000
	(Investment is made in specified securities @ 15% of the value of debentures redeemable in fifth instalment, i.e. Rs 10,00,000)

June 30	8% Debentures A/c		Dr.			10,00,000
	To Debentureholders’ A/c						10,00,000
	(20,000 8% Debenture of Rs 50 each due for redemption)

June 30	Bank A/c			Dr.		1,50,000
	To Debenture Redemption Investment A/c**						1,50,000
	(Investment made in securities, now encashed)

June 30	Debentureholders’ A/c		Dr.			10,00,000
	To Bank A/c						10,00,000
	(Payment made to debentureholders)

June 30	Debenture Redemption Reserve A/c		Dr.			2,50,000
	To General Reserve A/c						2,50,000
	(Debenture Redemption Reserve transferred to General Reserve)

*As per circular no. 04/2015 issued by Ministry of Corporate Affairs (dated 11.02.2013), every company required to create/maintain DRR shall on or before the 30th day of April of each year, deposit or invest, as the case may be, a sum which shall not be less than fifteen percent of the amount of its debentures maturing during the year ending on the 31st day of March next following year. Accodingly, entry for investment in Government securities has been passed a year before first redemption year.

**Since nothing is specified, investments will be encashed before debentures are redeemed.

Note: Since the question is silent regarding the payment of interest, the following entries may be passed at the end of every year (i.e. on 31 March before the redemption of debentures). However, it is not essential to pass these entries unless explicitly stated in the question.

Debenture Interest A/c	Dr.	Interest Rate $\times$ Amt. of Debentures outstanding
To Debentureholders’ A/c
(Interest due)

Debentureholders’ A/c	Dr.
To Bank A/c
(Payment of interest to debentureholders’)
		With the total amount of interest paid in a year
Statement of Profit and Loss	Dr.
To Debenture Interest A/c
(Transfer of debenture interest to Statement of Profit and Loss)

Question 20:

Venus Ltd. had 9,000, 9% Debentures of â‚¹ 100 each due for redemption . These debentures are to be redeemed in 3 equal installments (starting from 31st March,2015) at a premium of 10%. The company had a balance of â‚¹ 25,000 in the Debentures Redemption Reserve .
Pass necessary entries for redemption of debentures assuming that company transfer the balance of DRR to General Reserve after redeeming all the debentures.

Answer:

Journal
Date	Particulars		L.F.	Debit Amount (â‚¹)	Credit Amount (â‚¹)
2014
Mar. 31	Statement of Profit and Loss	Dr.		2,00,000
	To Debenture Redemption Reserve A/c				2,00,000
	(Transfer of balance amount to DRR)

Apr. 30	Debenture Redemption Investment A/c	Dr.		45,000
	To Bank A/c				45,000
	(15% amount invested in securities)
2015
Mar. 31	9% Debentures A/c	Dr.		3,00,000
	Premium on Redemption of Debentures A/c	Dr.		30,000
	To Debentureholders’				3,30,000
	(3,000, 9% Debentures due for payment at 10% premium)

	Bank A/c	Dr.		45,000
	To Debenture Redemption Investment A/c				45,000
	(DRI encashed)

	Debentureholders’ A/c	Dr.		3,30,000
	To Bank A/c				3,30,000
	(Payment to debentureholders’)

Apr. 30	Debenture Redemption Investment A/c	Dr.		45,000
	To Bank A/c				45,000
	(15% amount invested in securities)
2016
Mar. 31	9% Debentures A/c	Dr.		3,00,000
	Premium on Redemption of Debentures A/c	Dr.		30,000
	To Debentureholders’				3,30,000
	(3,000, 9% Debentures due for payment at 10% premium)

	Bank A/c	Dr.		45,000
	To Debenture Redemption Investment A/c				45,000
	(DRI encashed)

	Debentureholders’ A/c	Dr.		3,30,000
	To Bank A/c				3,30,000
	(Payment to debentureholders’)

Apr. 30	Debenture Redemption Investment A/c	Dr.		45,000
	To Bank A/c				45,000
	(15% amount invested insecurities)
2017
Mar. 31	9% Debentures A/c	Dr.		3,00,000
	Premium on Redemption of Debentures A/c	Dr.		30,000
	To Debentureholders’				3,30,000
	(3,000, 9% Debentures due for payment at 10% premium)

	Bank A/c	Dr.		45,000
	To Debenture Redemption Investment A/c				45,000
	(DRI encashed)

	Debentureholders’ A/c	Dr.		3,30,000
	To Bank A/c				3,30,000
	(Payment to debentureholders’)

	Debenture Redemption Reserve A/c	Dr.		2,25,000
	To General Reserve A/c				2,25,000
	(DRR closed by transferring to General Reserve)

Working Notes:

\begin{array}{l} Amount to be transferred to DRR = 9, 00, 000 \times \frac{25}{100} = 2, 25, 000 \\ Existing Balance in DRR = Rs 25,000 \\ Net Amount to be Transferred = 2, 25, 000 - 25, 000 = Rs 2, 00, 000 \\ Amount transferred to DRI = 9, 00, 000 \times \frac{15}{100} = 1, 35, 000 (in three equal instalments of 45,000 each) \end{array}

Question 21:

Tata Motors Ltd. issued 40,000;7% Debentures of â‚¹ 100 each on 1st July,2009 redeemable at premium of 5% as under:

On 31st March,2015 16,000 Debentures
On 31st March,2016 16,000 Debentures
On 31st March,2017 8,000 Debentures
It was decided to transfer amount out of profit to Debentures Redemption Reserve â‚¹ 2,00,000 on 31st March, 2012; â‚¹ 4,00,000 on 31st March , 2013 and balance on 31st March, 2014. It invested the required amount in terms of the Companies Act, 2013 in Government Securities and decided to realise them after last redemption . Paas journal entries ignoring interest .

Answer:

Books of Tata Motors Ltd.
Journal
Date	Particulars			L.F.	Debit Amount Rs	Credit Amount Rs
2009
July 01	Bank A/c		Dr.		40,00,000
	To Debenture Application A/c					40,00,000
	(Debenture application money received)

	Debenture Application A/c		Dr.		40,00,000
	Loss on Issue of Debentures A/c		Dr.		2,00,000
	To 7% Debentures A/c					40,00,000
	To Premium on Redemption A/c					2,00,00
	(40,000 7% Debenture of Rs 100 each issued)

2012
March 31	Statement of Profit and Loss		Dr.		2,00,000
	To Debenture Redemption Reserve A/c					2,00,000
	(Surplus amount is transferred to Debenture Redemption Reserve)

2013
March 31	Statement of Profit and Loss		Dr.		4,00,000
	To Debenture Redemption Reserve A/c					4,00,000
	(Surplus amount is transferred to Debenture Redemption Reserve)

2014
March 31	Statement of Profit and Loss		Dr.		4,00,000
	To Debenture Redemption Reserve A/c					4,00,000
	(Surplus amount is transferred to Debenture Redemption Reserve)

April 30	Debenture Redemption Investment A/c		Dr.		2,40,000
	To Bank A/c					2,40,000
	(Investment is made in specified securities equal to 15% of the value of debentures redeemed on March 31, 2014)
2015
March 31	7% Debenture A/c		Dr.		16,00,000
	Premium on Redemption A/c		Dr.		80,000
	To Debentureholders’ A/c					16,80,000
	(16,000 7% Debenture of Rs 100 each due for redemption along 5% Premium on redemption)

March 31	Debenture holders		Dr.		16,80,000
	To Bank A/c					16,80,000
	(Amount paid to debenture holders)

March 31	Debenture Redemption Reserve A/c Dr.				4,00,000
	To General Reserve					4,00,000
	(Debenture Redemption Reserve transferred to General Reserve)

April 30	Debenture Redemption Investment A/c Dr.				2,40,000
	To Bank A/c					2,40,000
	(Investment is made in specified securities equal to 15% of the value of debentures redeemed on March 31, 2015)

2016
March 31	7% Debenture A/c		Dr.		16,00,000
	Premium on Redemption of Debentures A/c		Dr.		80,000
	To Debenture holders					16,80,000
	(16,000 7% Debentures of Rs 100 each due for redemption along with 5% premium on redemption)

March 31	Debentureholders’ A/c		Dr.		16,80,000
	To Bank A/c					16,80,000
	(Amount paid to debenture holders)

March 31	Debenture Redemption Reserve A/c Dr.				4,00,000
	To General Reserve					4,00,000
	(Debenture Redemption Reserve transferred to General Reserve)

April 30	Debenture Redemption Investment A/c Dr.				1,20,000
	To Bank A/c					1,20,000
	(Investment is made in specified securities equal to 15% of the value of debentures redeemed on March 31, 2016)

2017
March 31	7% Debenture A/c		Dr.		8,00,000
	Premium on Redemption of Debentures A/c		Dr.		40,000
	To Debenture holders					8,40,000
	(8,000 7% Debentures of Rs 100 each due for redemption along with 5% premium on redemption)

March 31	Debentureholders’ A/c	Dr.			8,40,000
	To Bank A/c					8,40,000
	(Payment made to debenture holders)

March 31	Bank A/c		Dr.		6,00,000
	To Debenture Redemption Investment A/c					6,00,000
	(Investment made in securities, now encashed)

March 31	Debenture Redemption Reserve A/c		Dr.		2,00,000
	To General Reserve A/c					2,00,000
	(Debenture Redemption Reserve transferred to General Reserve)

Working Note:

WN1 Calculation of amount of DRR
$Amount for DRR (25 % of Debentures Issued) = 40, 00, 000 \times \frac{25}{100} = Rs 10, 00, 000 L e s s : Amount transferred in 2012 = Rs 2, 00, 000 L e s s : Amount transferred in 2013 = Rs 4, 00, 000 Amount transferred in 2014 = Rs 4, 00, 000$

Question 22:

'Ananya Ltd.' had an authorised capital of â‚¹ 10,00,00,000 divided into 10,00,000 equity shares of â‚¹ 100 each. The company had already issued 2,00,000 shares. The dividend paid per share for the year ended 31st March,2007 was â‚¹ 30 . The management decided to export its products to African countries . To meet the requirements of additional funds, the finance manager put up the following three alternate proposals before the Board of Directors:
(a) Issue 47,500 equity shares at a premium of â‚¹ 100 per share .
(b) Obtain a long-term loan from bank which was available at 12% per annum.
(c) Issue 9% Debentures at a discount of 5%.
After evaluating these alternatives , the company decided to issue 1,00,000,9% Debentures on 1st April,2008. The face value of each debentures was â‚¹ 100 . These debentures were redeemable in four installments starting from the end of third year, which were as follows:

Year	III	IV	V	VI
Amount (â‚¹)	10,00,000	20,00,000	30,00,000	40,00,000

Prepare 9% Debenture Account form 1st April, 2008 till all the debentures were redeemed.

Answer:

9% Debentures Account
Dr.				Cr.
Date	Particulars	J.F.	Amount Rs		Date	Particulars	J.F.	Amount Rs
2009					2008
Mar. 31	Balance c/d		1,00,00,000		Apr. 01	Debenture Application A/c		95,00,000
					Apr. 01	Discount on Issue of Debentures A/c		5,00,000
			1,00,00,000					1,00,00,000

2010					2009
Mar. 31	Balance c/d		1,00,00,000		Apr. 01	Balance b/d		1,00,00,000

			1,00,00,000					1,00,00,000
2011					2010
Mar. 31	Debentureholders’ A/c		10,00,000		Apr. 01	Balance b/d		1,00,00,000
Mar. 31	Balance c/d		90,00,000
			1,00,00,000					1,00,00,000

2012					2011
Mar. 31	Debentureholders’ A/c		20,00,000		Apr. 01	Balance b/d		90,00,000
Mar. 31	Balance c/d		70,00,000
			90,00,000					90,00,000
2013					2012
Mar. 31	Debentureholders’ A/c		30,00,000		Apr. 01	Balance b/d		70,00,000
Mar. 31	Balance c/d		40,00,000

			70,00,000					70,00,000
2014					2013
Mar. 31	Debentureholders’ A/c		40,00,000		Apr. 01	Balance b/d		40,00,000

			40,00,000					40,00,000

Page No 10.29:

Question 1:

Answer:

Page No 10.29:

Question 2:

Answer:

Page No 10.29:

Question 3:

Answer:

Page No 10.29:

Question 4:

Answer:

Page No 10.29:

Question 5:

Answer:

Page No 10.29:

Question 6:

Answer:

Page No 10.30:

Question 7:

Answer:

Page No 10.30:

Question 8:

Answer:

Page No 10.30:

Question 9:

Answer:

Page No 10.30:

Question 10:

Answer:

Page No 10.30:

Question 11:

Answer:

Page No 10.30:

Question 12:

Answer:

Page No 10.30:

Question 13:

Answer:

Page No 10.30:

Question 14:

Answer:

Page No 10.30:

Question 15:

Answer:

Page No 10.31:

Question 16:

Answer:

Page No 10.31:

Question 17:

Answer:

Page No 10.31:

Question 18:

Answer:

Page No 10.31:

Question 19:

Answer:

Page No 10.31:

Question 20:

Answer:

Page No 10.31:

Question 21:

Answer:

Page No 10.32:

Question 22:

Answer: