Issue And Redemption Of Debentures - Class 12 Commerce Accountancy - Extra Questions

State the provisions of the Companies Act, 20132013 for the creation of 'Debenture Redemption Reserve'.

As per Section 71(4)71(4) of the Companies Act, 20132013 and Companies (Share Capital and Debentures)  Rules, 20142014, every company issuing debentures is required to create Debenture Redemption Reserve of an amount that is atleast equal  to 25%25% of the total nominal (face) value of debenture that are redeemable by it.


Pure Ltd. issues 1,00,0001,00,000 12%12% Debentures of Rs. 1010 each at Rs. 9.409.40 on 1st1st January, 20182018. Under the terms of issue, the Debentures are redeemable at the end of 55 years from the date of issue.
Calculate the amount of discount to be written-off in each of the 55 years.

Total amount of discount comes to Rs. 60,00060,000(Rs. 0.6×1,00,000)0.6×1,00,000). The amount of discount to be written-off in each year is calculated as under.
Year endDebenturesRatio in which discount to be written-offAmount of discount to be written-off
11stRs. 10,00,00010,00,0001/51/51/51/5th of Rs. 60,000=60,000=Rs. 12,00012,000
22ndRs. 10,00,00010,00,0001/51/51/51/5th of Rs. 60,000=60,000=Rs. 12,00012,000
33rdRs. 10,00,00010,00,0001/51/51/51/5th of Rs. 60,000=60,000=Rs. 12,00012,000
44thRs. 10,00,00010,00,0001/51/51/51/5th of 60,000=60,000=Rs. 12,00012,000
55thRs. 10,00,00010,00,0001/51/51/51/5th of Rs. 60,000=60,000=Rs. 12,00012,000



Complete the following journal entries left blank in the books of VK Ltd:                                                      VK Ltd.                                                      Journal
     Date
              Particulars
L.F  Debit
Amount
     Rs.		  Credit
Amount
     Rs.
2018
February 01


________Dr
_______
(Purchased own 500,9500,9% debentures
of Rs. 100100 each at Rs. 9797 each for
immediate cancellation)		_____




_____


February 01



_______

_________________ Dr
   __________________
   __________________
(Cancelled own debentures)
________________________________
 _________________Dr
   _______________
(_________________)		______




______


______
______



______

                                                    VK Ltd.
                                                      Journal
     Date
              Particulars
L.F  Debit
Amount
     Rs.		  Credit
Amount
     Rs.
2018
February 01


9% debenture account Dr
     To bank account
(Purchased own 500,9500,9% debentures
of Rs. 100100 each at Rs. 9797 each for
immediate cancellation)		48,500




48,500


February 01



March 31


 Debenture account Dr
      To profit on cancellation  
     To 9% debenture account 
(Cancelled own debentures)
________________________________
 Profit on cancellation Dr
    To capital reserve account
(Being profit transefered)		50,000





1500

   1,500
48,500

1500


On 1st April, 2014, KK Ltd., invited applications for issuing 5,0005,000 1010% debentures of Rs. 1,0001,000 each at a discount of 66%. These debentures were repayable at the end of 3rd3rd year at a premium of 1010%. Applications for 6,0006,000 debentures were received and the debentures were allotted on pro-rata basis to all the applicants. Excess money received with applications was refunded.
The directors decided to transfer the minimum amount to Debenture Redemption Reserve on 31,3,On 1.4.2016, the company invested the necessary amount in 99% bank fixed deposit as per the provisions of the Companies Act,Tax was deducted at source by bank on interest @1010% p.a.
Pass the necessary journal entries for issue and redemption of debentures. Ignore entries relating to writing off loss on issue of debentures and interest paid on debentures.

 sr.no particulars amt amt
 1 Bank a/c ____dr
        To debenture application a/c
(being application money received)		 5640000 
5640000
 2 Debenture application ____dr
           To bank a/c
(Being amount refunded)		 94000 
94000
3  Debenture application ____dr
Loss on issue a/c _____dr
         To debenture a/c
         To Premium on redemption a/c
(Being redemption entry passed)		 470000
800000		 

5000000
500000
 4 Profit and loss appropriation a/c___dr
                 To debenture redemption reserve a/c
(Being DRR created)		 2500000 
2500000
 5 DRR____dr
      To general reserve a/c
(Being DRR transferred)		 2500000 
2500000


Class 12 Commerce Accountancy Extra Questions