Manish Ltd.issued ₹ 40,00,000; 8% Debentures of ₹ 100 each on 1st April, 2016. The terms of issue stated that the debentures are to be redeemed at a premium of 5% on 30th June, 2018. The company decided to transfer ₹ 10,00,000 out of profits to Debentures Redemption Reserve on 31st March, 2017 and ₹ 10,00,000 on 31st March, 2018.
Pass journal entries regarding the issue and redemption of debentures, DRR and investment without providing for the interest or loss on issue of debentures.
Answers
Manish Ltd.issued ₹ 40,00,000; 8% Debentures of ₹ 100 each on 1st April, 2016. The terms of issue stated that the debentures are to be redeemed at a premium of 5% on 30th June, 2018. The company decided to transfer ₹ 10,00,000 out of profits to Debentures Redemption Reserve on 31st March, 2017 and ₹ 10,00,000 on 31st March, 2018.
Pass journal entries regarding the issue and redemption of debentures, DRR and investment without providing for the interest or loss on issue of debentures. I will be there at your question my number is 9753268268 contact if any query
The journal entries regarding the issue and redemption of debentures, DRR and investment without providing for the interest or loss on issue of debentures are prepared below:
Explanation:
Given,
Manish Ltd.issued ₹ 40,00,000;
8% Debentures of ₹ 100 each on 1st April, 2016.
The terms of issue stated that the debentures are to be redeemed at a premium of 5% on 30th June, 2018.
The company decided to transfer ₹ 10,00,000 out of profits to Debentures Redemption Reserve on 31st March, 2017 and ₹ 10,00,000 on 31st March, 2018.
1. As per the section 71 (4) of the Companies Act, 2013,
Companies are required to create DRR at 25% of the total value of debentures
However, it is the discretion of the company to transfer more amounts to DRR than the prescribed amount of 25%
In this case, as explicitly specified about company's discretion for creation of DRR of a total amounting to Rs. 20,00,000 which is 50% of the total value of redeemable debentures is allowed.
2. As explicity stated in the question, entries for interest on debentures have been igonerd.
The journal entries regarding the issue and redemption of debentures, DRR and investment without providing for the interest or loss on issue of debentures are prepared below:
