Question

Ruchi Ltd. issued 42,000, $7\%$ Debentures of Rs 100 each on 1st April, 2011, redeemable at a premium of $8\%$ on 31st March 2015. The company decided to create required Debenture Redemption Reserve on 31st March 2014. The company invested the funds as required by law in a fixed deposit with State Bank of India on 1st April, 2014 earning interest at $10\%$ per annum. Tax was deducted at source by the bank on interest at $10\%$. Pass necessary Journal Entries regarding issue ans redemption of debentures.

Answer 1

$\begin{array}{ccccccc}& & & & \text{Books of Ruchi Ltd}& & \\ & & & & \text{JOURNAL}& & \end{array}\begin{array}{cccccc}\text{Date}& \text{Particulars}& & \text{L.F}& \text{Dr (Rs)}& \text{Cr. (Rs)}\\ 2011& & & & & \\ \text{April 1}& \text{Bank A/c}& \text{Dr}& & 42,00,000& \\ & \text{To Debenture Application and Allotment A/c}& & & & 42,00,000\\ & \text{(Application/allotment money received on issue of Debentures)}& & & & \\ \text{April 1}& \text{Debenture Application and Allotment A/c}& \text{Dr}& & 42,00,000& \\ & \text{Loss on Issue of Debentures A/c}& \text{Dr}& & 3,36,000& \\ & \text{To}7\%\text{Debentures A/c}& \text{Dr}& & & 42,00,000\\ & \text{To Premium on Redemption of DEbentures A/c}& & & & 3,36,000\\ & \text{(Allotment of Debentures redeemable at}8\%& & & & \\ & \text{premium)}& & & & \\ 2014& & & & & \\ \text{March 31}& \text{Surplus in Statement of Profit and Loss}& \text{Dr}& & 10,50,000& \\ & \text{To Debenture Redemption Reserve A/c}& & & & 10,50,000\\ & \text{(Transfer of profits equal to}25\%\text{of the nominal}& & & & \\ & \text{value of debenture issued i.e.,}25\%\text{of}& & & & \\ & \text{Rs 42,00,000)}& & & & \\ 2014& & & & & \\ \text{March 31}& \text{Debenture Redemption Investment A/c}& \text{Dr}.& & 6,30,000& \\ & \text{To Bank A/c}& & & & 6,30,000\\ & \text{(Investment made at}15\%\text{of the nominal value}& & & & \\ & \text{of debentures to be redeemed i.e}15\%\text{of Rs}42,00,000)& & & & \\ 2015& & & & & \\ \text{March 31}& \text{Bank A/c}& \text{Dr}& & 6,86,700& \\ & \text{TDS Deposited A/c}& \text{Dr}& & 6,300& \\ & \text{To Debenture Redemption Investment A/c}& & & & 6,30,000\\ & \text{To Interest Received A/c}& & & & 63,000\\ & \text{(Fixed deposit encashed on Redemption and}& & & & \\ & \text{interest received at}10\%\text{p.a)}& & & & \\ \text{March 31}& 7\%\text{Debenture A/c}& \text{Dr}& & 42,00,000& \\ & \text{Premium on Redemption of Debentures A/c}& & & 3,36,000& \\ & \text{To Debentureholder's A/c}& & & & 45,36,000\\ & \text{(Amount due to Debentureholders )}& & & & \\ \text{March 31}& \text{Debentureholders A/c}& \text{Dr}& & 45,36,000& \\ & \text{To Bank A/c}& & & & 45,36,000\\ & \text{(Amount paid on redemption))}& & & & \\ \text{March 31}& \text{Debenture Redemption Reserve A/c}& \text{Dr}& & 10,50,000& \\ & \text{To General Reserve A/c}& & & & 10,50,000\\ & \text{(Debenture Redemption Reserve transferred to}& & & & \\ & \text{General Reserve)}& & & & \end{array}$