Question

Suresh Ltd. on 1st April 2014 acquired assets of the value of Rs 6,00,000 and liabilities worth Rs 70,000 from P & Co., at an agreed value of Rs 5,50,000. Suresh Ltd issued $12\%$ Debentures of Rs 100 each at a premium of $10\%$ in full satisfaction of purchase consideration. The debentures were redeemable on 30th November,2018 at a premium of $5\%$. Pass journal entries to record the above inclusing redemption of debentures.

Answer 1

$\begin{array}{ccccccc}& & & & \text{Suresh Ltd}& & \\ & & & & \text{JOURNAL}& & \end{array}\begin{array}{cccccc}\text{Date}& \text{Particulars}& & \text{L.F}& \text{Dr (Rs)}& \text{Cr. (Rs)}\\ 2014& & & & & \\ \text{April 1}& \text{Sundry Assets A/c}& \text{Dr}& & 6,00,000& \\ & \text{Goodwill A/c (Balancing figure)}& \text{Dr}& & 20,000& \\ & \text{To Sundry Liabilities A/c}& & & & 70,000\\ & \text{To P and Co}& & & & 5,50,000\\ & \text{(Purchase of assets and liabilities of P and Co)}& & & & \\ \text{April 1}& \text{P and Co}& \text{Dr}& & 5,50,000& \\ & \text{Loss on Issue of Debentures A/c}& \text{Dr}& & 25,000& \\ & \text{To}12\%{\text{Debentures A/c}}^{\left(1\right)}& & & & 5,00,000\\ & \text{To Securities Premium Reserve A/c}& & & & 50,000\\ & \text{To Premium on Redemption of}& & & & \\ & \text{Debentures A/c}& & & & 25,000\\ & \text{(Issue of 5,000 Debentures of Rs 100 each at}& & & & \\ & 10\%\text{Premium and redeemable at}5\%\text{premium)}& & & & \\ \text{2}018& & & & & \\ March31& \text{Surplus in Statement of Profit and Loss}& \text{Dr}& & 1,25,000& \\ & \text{To Debenture Redemption Reserve A/c}& & & & 1,25,000\\ & \text{(Transfer of profits equal to}25\%\text{of the}& & & & \\ & \text{nominal value of debentures issued)}& & & & \\ \text{April 30}& \text{Debenture Redemption Investment A/c}& \text{Dr}.& & 75,000& \\ & \text{To Bank A/c}& & & & 75,000\\ & \text{(Investment made at}15\%\text{of the face value of}& & & & \\ & \text{debentures to be redeemed)}& & & & \\ \text{Nov 30}& \text{Bank A/c}& \text{Dr}& & 75,000& \\ & \text{To Debenture Redemption Investment A/c}& & & & 75,000\\ & \text{(Investment encashed)}& & & & \\ \text{Nov. 30}& 12\%\text{Debentures A/c}& \text{Dr}& & 5,00,000& \\ & \text{Premium on Redemption of}& & & & \\ & \text{Debentures A/c}& \text{Dr}& & 25,000& \\ & \text{To Debentureholder's A/c}& & & & 5,25,000\\ & \text{(Amount due to redemption}& & & & \\ \text{Nov. 30}& \text{Debentureholder's A/c}& \text{Dr}& & 5,25,000& \\ & \text{To Bank A/c}& & & & 5,25,000\\ & \text{(Payment of amount due to debentureholders)}& & & & \\ \text{Nov 30}& \text{Debenture Redemption Reserve A/c}& \text{Dr}& & 1,25,000& \\ & \text{To General Reserve A/c}& & & & 1,25,000\\ & \text{(Transfer of Debenture Redemption Reserve}& & & & \\ & \text{A/c to General Reserve A/c on the}& & & & \\ & \text{redemption of all the debentures)}& & & & \end{array}$

Note 1. Debentures issued = $\frac{5,50,000}{110}=5,000$ Debentures of Rs 100 each.