Question

Tata Motors Ltd. issued 40,000;7% Debentures of ₹ 100 each on 1st July,2009 redeemable at premium of 5% as under:

On 31st March,2015 16,000 Debentures
On 31st March,2016 16,000 Debentures
On 31st March,2017 8,000 Debentures
It was decided to transfer amount out of profit to Debentures Redemption Reserve ₹ 2,00,000 on 31st March, 2012; ₹ 4,00,000 on 31st March , 2013 and balance on 31st March, 2014. It invested the required amount in terms of the Companies Act, 2013 in Government Securities and decided to realise them after last redemption . Paas journal entries ignoring interest .

Answer 1

Books of Tata Motors Ltd.
Journal
Date	Particulars			L.F.	Debit Amount Rs	Credit Amount Rs
2009
July 01	Bank A/c		Dr.		40,00,000
	To Debenture Application A/c					40,00,000
	(Debenture application money received)
	Debenture Application A/c		Dr.		40,00,000
	Loss on Issue of Debentures A/c		Dr.		2,00,000
	To 7% Debentures A/c					40,00,000
	To Premium on Redemption A/c					2,00,00
	(40,000 7% Debenture of Rs 100 each issued)
2012
March 31	Statement of Profit and Loss		Dr.		2,00,000
	To Debenture Redemption Reserve A/c					2,00,000
	(Surplus amount is transferred to Debenture Redemption Reserve)
2013
March 31	Statement of Profit and Loss		Dr.		4,00,000
	To Debenture Redemption Reserve A/c					4,00,000
	(Surplus amount is transferred to Debenture Redemption Reserve)
2014
March 31	Statement of Profit and Loss		Dr.		4,00,000
	To Debenture Redemption Reserve A/c					4,00,000
	(Surplus amount is transferred to Debenture Redemption Reserve)
April 30	Debenture Redemption Investment A/c		Dr.		2,40,000
	To Bank A/c					2,40,000
	(Investment is made in specified securities equal to 15% of the value of debentures redeemed on March 31, 2014)
2015
March 31	7% Debenture A/c		Dr.		16,00,000
	Premium on Redemption A/c		Dr.		80,000
	To Debentureholders’ A/c					16,80,000
	(16,000 7% Debenture of Rs 100 each due for redemption along 5% Premium on redemption)
March 31	Debenture holders		Dr.		16,80,000
	To Bank A/c					16,80,000
	(Amount paid to debenture holders)
March 31	Debenture Redemption Reserve A/c Dr.				4,00,000
	To General Reserve					4,00,000
	(Debenture Redemption Reserve transferred to General Reserve)
April 30	Debenture Redemption Investment A/c Dr.				2,40,000
	To Bank A/c					2,40,000
	(Investment is made in specified securities equal to 15% of the value of debentures redeemed on March 31, 2015)
2016
March 31	7% Debenture A/c		Dr.		16,00,000
	Premium on Redemption of Debentures A/c		Dr.		80,000
	To Debenture holders					16,80,000
	(16,000 7% Debentures of Rs 100 each due for redemption along with 5% premium on redemption)
March 31	Debentureholders’ A/c		Dr.		16,80,000
	To Bank A/c					16,80,000
	(Amount paid to debenture holders)
March 31	Debenture Redemption Reserve A/c Dr.				4,00,000
	To General Reserve					4,00,000
	(Debenture Redemption Reserve transferred to General Reserve)
April 30	Debenture Redemption Investment A/c Dr.				1,20,000
	To Bank A/c					1,20,000
	(Investment is made in specified securities equal to 15% of the value of debentures redeemed on March 31, 2016)
2017
March 31	7% Debenture A/c		Dr.		8,00,000
	Premium on Redemption of Debentures A/c		Dr.		40,000
	To Debenture holders					8,40,000
	(8,000 7% Debentures of Rs 100 each due for redemption along with 5% premium on redemption)
March 31	Debentureholders’ A/c	Dr.			8,40,000
	To Bank A/c					8,40,000
	(Payment made to debenture holders)
March 31	Bank A/c		Dr.		6,00,000
	To Debenture Redemption Investment A/c					6,00,000
	(Investment made in securities, now encashed)
March 31	Debenture Redemption Reserve A/c		Dr.		2,00,000
	To General Reserve A/c					2,00,000
	(Debenture Redemption Reserve transferred to General Reserve)

Working Note:

WN1 Calculation of amount of DRR
$$\begin{gathered} \mathrm{Amount}\mathrm{for}\mathrm{DRR}(25\%\mathrm{of}\mathrm{Debentures}\mathrm{Issued})=40,00,000\times \frac{25}{100}=\mathrm{Rs}10,00,000 \\ Less:\mathrm{Amount}\mathrm{transferred}\mathrm{in}2012=\mathrm{Rs}2,00,000 \\ Less:\mathrm{Amount}\mathrm{transferred}\mathrm{in}2013=\mathrm{Rs}4,00,000 \\ \mathrm{Amount}\mathrm{transferred}\mathrm{in}2014=\mathrm{Rs}4,00,000 \end{gathered}$$