Question

India Textiles Corporation Ltd. has outstanding ₹ 50,00,000; 9% Debentures of ₹ 100 each due for redemption on 31st July, 2017. Pass journal entries for redemption assuming that there is a balance of ₹ 3,00,000 in Debentures Redemption Reserve on the date of redemption.

Answer 1

The necessary journal entries in the books of the company are prepared below:

Explanation:

Given,

India Textiles Corporation Ltd. has outstanding ₹ 50,00,000;

9% Debentures of ₹ 100 each due for redemption on 31st July, 2017.

Calculation of amount transferred to Debenture Redemption Reserve Account

Amount for DRR ( 25% of Debenture Issued)

$=\left(50,00,000 \times \frac{25}{100}\right)=Rs.12,50,000$

Less: Amount already exist in Debenture Redemption Reserve

$=Rs.3,00,000$

Debenture Redemption Reserve to to be created for redemption

$= Rs.9,50,000}$

Calculation of amount invested in Specified Securities

Investment made in Specified Securities

$=50,00,000 \times \frac{15}{100}=Rs.7,50,000$

Note:

As the question was silent, entries for interest on debentures have been ignored.

However, these have been provided for reference.

The necessary journal entries in the books of the company are prepared below: