question_answer

Kompact Ltd's main business is manufacturing of tyres. The company is very particular about the observation of the provisions of the companies act. On 1st April, 2014, the company issued Rs. 9,00,000, 8% debentures of Rs. 100 each. The debentures were redeemable at a premium of 5%. On 31st March, 2017, all the debentures were redeemed. Since the manufacturing of tyres results in air pollution, the company had installed a plant for its effective control. Pass necessary journal entries for the redemption of debentures.

Answer:

JOURNAL

Date	Particulars		LF	Amt (Dr)	Amt (Cr)
2016
Mar 31	Surplus, i.e. Balance in Statement of Profit and Loss	Dr		2,25,000
	To Debenture Redemption Reserve A/c				2,25,000
	(Being the amount equal to 25% of the debentures transferred to DRR)
Apr 30	Debenture Redemption Investment A/c	Dr		1,35,000
	To Bank A/c				1,35,000
	(Being the amount equal to 15% of value of debentures to be redeemed invested)
2017
Mar 31	Bank A/c	Dr		1,35,000
	To Debenture Redemption Investment A/c				1,35,000
	(Being the investment encashed)
Mar 31	8% Debentures A/c	Dr		9,00,000
	Premium on Redemption of Debentures A/c	Dr		45,000
	To Debenture holders' A/c				9,45,000
	(Being the amount due on redemption)
Mar 31	Debenture holders' A/c	Dr		9,45,000
	To Bank A/c				9,45,000
	(Being the payment made to the debenture holders')
Mar 31	Debenture Redemption Reserve A/c	Dr		2,25,000
	To General Reserve A/c				2,25,000
	(Being the transfer of balance of DRR to general reserve)

Calculation of DRR \[9,00,000\times \frac{25}{100}=Rs.\,2,25,000\] Calculation of Debenture Redemption Investment \[9,00,000\times \frac{15}{100}=Rs.\,1,35,000\]