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Important Questions Class 12 Accountancy Chapter 9 Company Accounts Redemption Debentures

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Redemption Methods : (1) Redemption in Lump-sum (A) Redemption at Par Illustration 1 :  X Ltd. Redeemed its 10,000 10% Debentures of L10 each at par on 31st March 2015. X Ltd.

(B) Redemption at Premium Illustration 2:  Z Ltd. Redeemed its 1,00,000 10% Debentures of Rs. 10 each at 5% premium on 31 March, 2015.

  Illustration 3 :  Rajesh Export Ltd. has 2,000, 9% Debentures of Rs.100 each due on redemption on 31st march 2015. Debentures redemption reserve has a balance of Rs. 30,000 on that date. Record the necessary journal entries at the time of redemption of debentures. Illustration 4:  Rahul Ltd. has 50,000 9% Debentures of Rs. 50 each due on redemption on 31 st  March 2015. Debentures redemption reserve has a balance of Rs. 5,00,000 on that date. Record the necessary journal entries at the time of redemption of debentures. Rajesh Export Ltd.

Illustration 4 :  Rahul Ltd. has 50,000 9% Debentures of Rs. 50 each due on redemption on 31st March 2015. Debentures redemption reserve has a balance of Rs. 5,00,000 on that date. Record the necessary journal entries at the time of redemption of debentures.

Illustration 5 :  HDFC Bank Ltd. has outstanding 10,000, 9% Debentures of Rs.50 each due on redemption on 31st March 2015. Record the necessary journal entries at the time of redemption of debentures. Rajesh Export Ltd.

Note:  The Banking Companies are exempted from creating DRR as per Rule 18 (7) of companies (Share Capital and Debentures) Rules, 2014. Illustration 6 :  ICICI Bank Ltd., a Banking company has outstanding 10 lac, 9% Debentures of Rs.5 each due for redemption on 30st Sept. 2015. Record the necessary entries at the time of redemption of debentures. Solution : Journal of AN power Ltd. (Rs. In lac)

Note :  As per SEBI Guideline, Banking companies are exempted from creating Debenture Redemption Reserve. Illustration 7 :  Abha Ltd. has 5,000 10% Debentures of Rs.20 each due for redemption on 30th Sept. 2015. Debenture Redemption Reserve has a balance of Rs.20,000 on that date. Record the necessary entries at the time of redemption of debentures. Journal in the Books of Abha Ltd.

Illustration 8:  Vivek Transport Ltd. has 5,000; 10% Debentures of Rs. 20 each due for redemption on 30 th  sept. 2015. Debentures Redemption Reserve has a balance of Rs. 80,000 on that date. Record the necessary entries at the time of redemption of debentures. Solution: Journal in the Books of Vivek Transport Ltd.

Illustration 9:  Rahul Ltd. Redeemed Rs. 25,00,000; 12% Debentures at a premium of 5% out of profit on 30 th  Sept., 2015. Pass the necessary journal entries for the redemption of Debentures. Solution : Journal in the Books of Rahul Ltd.

Redemption method :  2 Draw of lots Illustration 10 :  S Ltd. redeemed its Rs.10,000, 8% Debentures out of capital by drawing a lot on 30 Nov. 2015. Journalise. Solution: Journal of S. Ltd.

Note:  The DRR Balance will be transferred to General Reserve after all the debentures are redeemed.) Illustration 12:  Y Ltd redeemed its Rs. 20,000, 9% debentures out of profit by drawing of lot on 30 th  Nov. 2015 Journalise. Y Ltd.

Note:  The DRR Balance will be transferred to General Reserve after all the debenture are redeemed. Illustration 13:  Pass the necessary journal entries for the issue and redemption of Debentures in the following cases: (i) 10,000, 10% Debentures of Rs. 120 each issued at 5% premium, repayable at par. (ii) 20,000, 9% Debentures of Rs. 200 each issued at 20% premium, repayable at 30% premium. Journal

Illustration 14:  Raj Electrical Ltd. had Rs.5,00,000; 10% Debentures of Rs.100 each outstanding on 31st Jan 2015. On this date, company decided to purchase Rs.50,000 worth debentures at Rs.97 in the open market. Give Journal entries if: (i) Debentures are purchased for immediate cancellation. (ii) Debentures are purchase as investment (A), and on 31st March 2015 sold for Rs.52,000 or (B) if cancelled on 31st March, 2015 (treatment of interest is to be ignored). Solution : I. Debentures Purchased for Cancellation Journal

II. When Debentures are purchased as investment. Journal

II. (A) If Debentures Purchases as investment at investment are sold for Rs. 52,000 on 31 st  march, 2014 Journal

II. (B) If Debentures Purchase as investment are cancelled.

Illustration 15:  If in illustration no. 14. Interest on debentures to be provided on 30 th  Sept, 31 st  March every year. Give the journal entries for int. on debentures on 31 st  March, 2015. Solution: Journal

Questions 1:  Fill the missing figures in the following journal entries Journal Entries

Question 2:  Filling the missing figures Journal Entries

Question 3:  Filling the missing information in following journal entries Journal Entries

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Debentures Redemption Investment A/c Dr.

(Being investment mode in specified securities)

Balance in statement of Profit & Loss A/c Dr.

To Debentures Redemption reserve A/c

(Being transfer of profit to Debentures Red. Reserve)

To Debentures Redemption investment A/c

(Being the amount paid to Debenture holders)

(Being the amount paid to Debenture holders)

(Being DRR A/c Closed by transfer to General Reserve A/c after redemption of all Debentures)

Debentures Redemption Investment A/c Dr.

Balance in statement of Profit & Loss A/c Dr.

To Debentures Redemption Reserve A/c

(Being transfer of profit to Debentures Redemption Reserve)

To Deb. Redemption Investment A/c Dr.

Premium on Redemption of Debentures A/c Dr.

(Being the amount due to Debenture holders)

(Being the amount paid to Debenture holders)

Debentures Redemption Reserve A/c Dr.

(Being DRR A/c Closed by transfer to General Reserve A/c after redemption of all Debentures)

Balance in statement of profit & loss A/c Dr.

To Debentures Redemption Investment A/c Dr.

(Being transfer of profit to Debentures Redemption Reserve)

Debentures Redemption Investment A/c Dr.

(Being Investment in Specified Securities made)

(Being the amount due to Debenture holders)

(Being the amount paid to Debenturesholders)

Debentures Redemption Reserve A/c Dr.

(Being DRR A/c closed by transfer to General Reserve A/c after redemption of all Debentures)

Balance in Statement of Profit & Loss A/c Dr.

To Debentures Redemption Reserve A/c

(Being transfer of profit to Debenture Redemption Reserve)

Debentures Redemption Investment A/c Dr.

(Being Investment in specified securities made)

(Being the amount due to Debenture holders)

(Being the amount paid to Debenture holders)

Debentures Redemption Reserve A/c    Dr.

(Being DRR A/c Closed by transfer to General Reserve A/c after redemption of all Debentures)

(Being the amount due to Debenture holders)

(Being the amount paid to Debenture holders)

(Being the amount due to Debenture holders on Redemption)

(Being the amount due to Debenture holders paid)

Debentures Redemption Investment A/c Dr.

Balance in Statement of Profit and Loss A/c Dr.

To Debentures Redemption Reserve A/c

(Being the required amount transfer to DRR)

To Debentures Redemption Investment A/c

(Being the amount due to Debenture holders on redemption)

(Being the amount due to Debenture holders paid)

Debenture Redemption Reserve A/c Dr.

(Being the DRR Transfer to General Reserve)

Debentures Redemption Investment A/c Dr.

(Being investment made for Debentures redemption)

Balance in Statement of Profit/loss A/c Dr.

To Debentures Redemption Reserve A/c

(Being Deb. Red. Reserve Created upto 100% of amount of Debentures.)

(Being amount due to Debentures holders on Red.)

(Being amount paid to Debentures holders)

(Being Deb. Red. Res. Amount transferred is Gen. Reserve)

Debentures Redemption investment A/c dr.

(Being investment made equal to 15% of the debentures be redeemed in current financial year)

To Debentures Redemption investment A/c

(Being Deb. Red. Investment encashed)

Balance in Statement of Profit & Loss A/c Dr.

(Being amount equal to 100% of Debenture amount transferred to Deb. Red. Reserved A/c)

Premium on Red. Of Debentures A/c  Dr.

(Being the amount due to Debentures holders)

(Being Deb. Red. Investment encashed)

(Being Payment made to Debentures holders)

Debentures Redemption Reserve A/c   Dr.

(Being DRR transferred to General Reserve)

Debentures Redemption Investment A/c Dr.

(Being investment in specified securities made)

Balance in Statement of Profit & Loss A/c Dr.

To Debentures Redemption Reserve A/c Dr.

(Being transfer of profit to Debentures Redemption Reserve)

(Being the amount due to Debenture holders)

(Being the amount paid to Debenture holders)

Deb. Redemption Investment A/c   Dr.

Balance in Statement of profit & Loss A/c Dr.

To Debentures Redemption Reserve A/c

(Being transfer of profit to Debentures Redemption Reserve)

(Being the amount due to Debentures)

(Being the amount paid to Debenture holders)

To Debentures application and Allotment A/c

(Being receipt of Application money)

Debentures Application and  Allotment A/c Dr.

(Being Issue of 10% Debenture at Premium Redeemable at par)

(Being amount due to Debentures holders)

(Being the amount paid to debentures)

To Debentures Application and Allotment A/c

(Being Receipt of Application money)

Debentures Application and Allotment A/c    Dr.

Loss on Issue of Debentures A/c Dr.

To Premium on Redemption of Debentures A/c

(Being Issue of 9% Debentures at premium redeemable at premium)

Premium on Redemption of Debentures A/c

(Being amount due to Debentures holder)

(Being the amount paid to Debentures holders)

(Rs. 50,000 debentures Purchased at Rs. 97 per debenture for cancellation)

To profit on Cancellation of own Debentures A/c

Profit Cancellation of own Debentures A/c Dr.

(Profit Cancellation transferred to capital Reserve)

Investment in own Debentures A/c Dr.

(Purchase of 500 Debentures @ Rs. 97 each as investment)

To investment in own Debentures A/c

To profit on sale of Own Debenture A/c

(Sale of investment in own debentures)

Profit on sale of Own Debentures A/c Dr.

(Profit on sale of own debentures transferred to statements of P/L

To Investment in own Debentures A/c

To profit on Cancellation of Own Debentures A/c

Profit on Cancellation of own Deb. A/c Dr.

(Being Profit on Cancelation transferred to capital reserve)

(Inst. On Rs. 4,50,000 Debentures @ 10% p.a. for half year and on Rs. 50,000 own Deb.)

(Interest Paid no Rs. 4,50,000 Debentures)

(Interest of whole year transferred to statement of profit & Loss)

Interest on own Debentures A/c     Dr.

(Interest earned on own debentures transferred to statement of Profit & Loss)

Debentures Redemption Investment A/c    Dr.

(Being Investment @ 15% of the redeemable debenture made as per rule 18 (7))

To Debentures Redemption Investment A/c

Balance in statement of P&L A/c    Dr.

To Debenture Redemption Reserve A/c

(Being profits transferred to DRR as per Rule 18 (7))

Premium Redemption of Deb. A/c    Dr.

(Being amount of 8% Debentures of Rs. 100 due redemption at 5% premium)

Debentures Redemption Resour A/c Dr.

(Being amount of DRR transferred to General Reserve A/c

(Being 500 own debentures of Rs. 97 for immediate cancellation)

To Profit on Redemption of Deb. A/c

(Being profit on redemption transferred to capital Reserve)

(Being 200 own debentures of Rs. 100 each purchased at Rs. 96 plus 150 for brokerage)

Profit and Redemption of Deb. A/c Dr.

(Being profit an Redemption transferred)

To Debentures Application and Allotment A/c

Debentures Application and Allotment A/c Dr.

To Premium on Redemption of Debentures A/c

(being Debentures issued to discount of 5% repayable at 10% premium)

Debentures Redemption Investment A/c Dr.

(Being Investment @ 15% of Redeemable amount mode in specified securities)

To Debentures Redemption Investment A/c

Balance in Statement of P/L A/c   Dr.

To Debenture Redemption Reserve A/c

Premium Redemption of Deb. A/c  Dr.

(Being Debenture due for redemption)

(Being Debenture paid to Debenture holders)

Debenture Redemption Reserve A/c Dr.

(Being Balance in DRR transferred to General Reserve)