Question

12 Wellness Co. Ltd. has issued 20,000, 9% Debentures of ₹ 100 each at a premium of 10% on 1st

April, 2018 redeemable as follows:

31st March, 2021 – 10,000 debentures

31st March, 2022 – 4,000 debentures

31st March, 2023 – balance debentures.

It transferred to Debentures Redemption Reserve the required amount as applicable rules of the

Companies Act and Rules, 2014 on due date. How much amount will be transferred to General

Reserve on 31st March, 2021

a) ₹ 1,00,000

b) ₹ 2,50,000

c) ₹ 5,00,000

d) ₹ 20,00,00.​

Answer 1

Answer:

option B ₹2,50,000

Explanation:

25% of redeemable value of debenture ..means 25% of ₹10,00,000= ₹2,50,000

Answer 2

Debenture redemption reserve is created before the redemption of debenture, the company shall create DRR out of the profits of the company, which are available for the payment of dividend .

       profit and loss a/c dr.

              to DRR A/c          

  (DRR is as a ..% of o/s amount of debenture )

The amount credited to DRR not be utilized by the company except for the purpose of redemption of debenture.

balance of DRR is transferred to General reserve a/c after the debenture are redeemed -

      DRR A/c     dr.

          to general reserve a/c.

extent and adequacy of DRR :- 10% pf value of debenture

               value of debenture = 20000*100

                                                = 2000000

       DRR = 2000000 * 10%

               =  200000

but as per the new amendment public companies not need to create DRR.