Question

A Ltd purchased for canellation Rs 50,000 of its $15\%$ debentures at Rs 98. The expenses of purchase amounted to Rs 50.

Answer 1

$\text{Journal Entries}\begin{array}{cccccc}\text{Date}& \text{Particulars}& & \text{LF}& \text{Amt. (Dr)}& \text{Amt. (Cr)}\\ & \text{Own Debenture A/c}& \text{Dr}& & 49,050& \\ & \text{To Bank A/c (49,000+50)}& & & & 49,050\\ & \text{(Debentures face value Rs 50,000}& & & & \\ & \text{purchased for cancellation)}& & & & \\ & 15\%\text{Debentures A/c}& \text{Dr}& & 50,000& \\ & \text{To Own Debenture A/c}& & & & 49,050\\ & \text{To Profit on Cancellation of Debentures A/c}& & & & 950\\ & \text{W. Note)}& & & & \\ & \text{(Debentures face value of Rs 50,000}& & & & \\ & \text{cancelled)}& & & & \\ & \text{Profit on Cancellation Debentures A/c}& \text{Dr}& & 950& \\ & \text{To Capital Reserve A/c}& & & & 950\\ & \text{(Profit on cancellation of own debentures}& & & & \\ & \text{transferred to capital reserve account )}& & & & \end{array}$

Working Note
Number of Debentures Purchased = $\frac{50,000}{100}=500$
Profit on purchase = (100-98) $\times$ 500 = 1,000
Less expenses of purchase =$\underset{–}{\left(50\right)}$
Profit on cancellation =$\underset{–}{\underset{–}{950}}$