Question

Kusum Steel Industries Ltd. issued 21,000, $7^{\frac{1}{2}}\%$ Debenturs of Rs 100 each on March 31, 2011 redeemable at a premium of $8\%$ on 30th June, 2018. The Board of Directors decided to transfer the required amount to Debentue Redemption Reserve in three equal annual instalments starting with March 31, 2016. Record necessary journal entries regarding issue and redemption of debentures. Ignore entries relating to writing off loss on issue of debentures and interest paid thereon.

Answer 1

$\begin{array}{ccccccc}& & & & \text{Books of Kusum Steel Industries Ltd}& & \\ & & & & \text{JOURNAL}& & \end{array}\begin{array}{cccccc}\text{Date}& \text{Particulars}& & \text{L.F}& \text{Dr (Rs)}& \text{Cr. (Rs)}\\ 2011& & & & & \\ \text{March 31}& \text{Bank A/c}& \text{Dr}& & 21,00,000& \\ & \text{To}{7}^{\frac{1}{2}}\%\text{Debenture Application}& & & & \\ & \text{Allotment A/c}& & & & 21,00,000\\ & \text{(Application money received on issue of debentures)}& & & & \\ \text{March 31}& 7^{\frac{1}{2}}\%\text{Debenture Application and}& & & & \\ & \text{Allotment A/c}& \text{Dr}& & 21,00,000& \\ & \text{Loss on Issue of Debenture A/c}& \text{Dr}& & 1,68,000& \\ & \text{To}{7}^{\frac{1}{2}}\%\text{Debenture A/c}& & & & 21,00,000\\ & \text{To Debenture Redemption Premium A/c}& & & & 1,68,000\\ & \text{(Transfer of application money)}& & & & \\ 2016& & & & & \\ March31& \text{Surplus in Statement of Profit and Loss}& \text{Dr}& & 1,75,000& \\ & \text{To Debenture Redemption Reserve A/c}& & & & 1,75,000\\ & \text{(Transfer of profits to Debenture Redemption Reserve)}& & & & \\ 2017& & & & & \\ March31& \text{Surplus in Statement of Profit and Loss}& \text{Dr}& & 1,75,000& \\ & \text{To Debenture Redemption Reserve A/c}& & & & 1,75,000\\ & \text{(Transfer of profits to Debenture Redemption Reserve)}& & & & \\ 2018& & & & & \\ March31& \text{Surplus in Statement of Profit and Loss}& \text{Dr}& & 1,75,000& \\ & \text{To Debenture Redemption Reserve A/c}& & & & 1,75,000\\ & \text{(Transfer of profits to Debenture Redemption Reserve)}& & & & \\ \text{April 30}& \text{Debenture Redemption Investment A/c}& \text{Dr}.& & 3,15,000& \\ & \text{To Bank A/c}& & & & 3,15,000\\ & \text{(Investment made @}15\%\text{of the face value of}& & & & \\ & \text{of debentures to be redeemed)}& & & & \\ \text{June 30}& \text{Bank A/c}& \text{Dr}& & 3,15,000& \\ & \text{To Debenture Redemption Premium A/c}& & & & 3,15,000\\ & \text{(Investment encashed)}& & & & \\ \text{June 30}& \text{At the time of redemption}& & & & \\ & 7^{\frac{1}{2}}\%\text{Debentures A/c}& \text{Dr}& & 21,00,000& \\ & \text{Debentures Redemption Premium A/c}& \text{Dr}& & 1,68,000& \\ & \text{To Debentureholders A/c}& & & & 22,68,000\\ & \text{(Amount due to debentureholders on}& & & & \\ & \text{redemption of deberature)}& & & & \\ \text{June 30}& \text{Debentureholder's A/c}& \text{Dr}& & 22,68,000& \\ & \text{To Bank A/c}& & & & 22,68,000\\ & \text{(Payment of amount due to debentureholders)}& & & & \\ \text{June 30}& \text{Debenture Redemption Reserve A/c}& \text{Dr}& & 5,25,000& \\ & \text{To General Reserve A/c}& & & & 5,25,000\\ & \text{Debenture Redemption Reserve transferred to}& & & & \\ & \text{General Reserve)}& & & & \end{array}$