A.Ltd. purchased its own debentures of the face value of Rs.2,00,000 from the open market for immediate cancellation at Rs.92. Record the journal entries.

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Solution

In the books of A. Ltd.

Date

Particulars

L.F.

Debit

Amount

Rs

Credit

Amount Rs

Profit and Loss Appropriation A/c

Dr.

2,00,000

To Debentures Redemption Reserve A/c

2,00,000

(Profit transferred to Debenture Redemption Reserve)

Own Debentures A/c

Dr.

1,84,000

To Bank A/c

1,84,000

(2,000 Own Debentures @ Rs 100 each at Rs 92 purchased)

Debenture A/c

Dr.

2,00,000

To Own Debentures A/c

1,84,000

To Profit on Cancellation of Debentures A/c

16,000

(Debenture of Rs 2,00,000 cancelled)

Profit on Cancellation of Debentures A/c

Dr.

16,000

To Capital Reserve A/c

16,000

(Transfer of profit on redemption of debenture to Capital

Reserve Account)

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A Ltd purchased its own debentures of the face value of Rs 2,00,000 from the open market for immediate cancellation at Rs 92. Pass the journal entries.

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Date	Particulars	L.F	Debit Amount Rs.	Credit Amount Rs.
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Exercise

Amar Ltd. purchased assets of the book value of Rs 99,000 from Abhi Ltd. It was agreed that purchase consideration to be paid by issuing 11% Debentures of Rs 100 each Assume debentures have been issued.

1. At par

2. At Discount of 10% and

3. At Premium of 10%

Record necessary journal entries

Q. On January 1, 2012, X Ltd issued 40,000, 9% debentures of Rs. 100 each at Rs. 95.
The terms of issue provided that, beginning with 2014 Rs. 2,00,000 debentures should be redeemed either by drawings at par or by purchase in the open market every year. The expenses of issue amounted to Rs. 12,000 which were written-off in 2012. The company also wrote off Rs. 40,000 every year from Discount on Debentures Account. At the end of 2014, debentures to be redeemed were repaid by drawing. During 2015, to company purchased for cancellation 2,000 debentures at the market price or Rs. 98 on December 31, the expense being Rs. 400. Interest on debentures is payable at the end of every calender year.
Pass the journal entries in the books of the company to record these transactions.

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In the books of A. Ltd.
Date	Particulars				L.F.	Debit Amount Rs	Credit Amount Rs
	Profit and Loss Appropriation A/c			Dr.		2,00,000
		To Debentures Redemption Reserve A/c					2,00,000
	(Profit transferred to Debenture Redemption Reserve)

	Own Debentures A/c		Dr.			1,84,000
		To Bank A/c					1,84,000
	(2,000 Own Debentures @ Rs 100 each at Rs 92 purchased)

	Debenture A/c		Dr.			2,00,000
		To Own Debentures A/c					1,84,000
		To Profit on Cancellation of Debentures A/c					16,000
	(Debenture of Rs 2,00,000 cancelled)

	Profit on Cancellation of Debentures A/c			Dr.		16,000
		To Capital Reserve A/c					16,000
	(Transfer of profit on redemption of debenture to Capital Reserve Account)