Question

On 31st March, 2016, W Ltd. had the following balances in its books:
9% Debentures – ₹ 6,00,000
Debentures Redemption Reserve – ₹ 50,000
Surplus, i.e. Balance in Statement of Profit and Loss – ₹ 3,00,000
On that date, the company decided to transfer ₹ 1,00,000 to Debentures Redemption Reserve. It also decided to redeem debentures of ₹ 3,00,000 on 30th June, 2016.
Pass necessary journal entries in the books of the company.

Answer 1

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

Explanation:

Given,

On 31st March, 2016, W Ltd. had the following balances in its books:

9% Debentures – ₹ 6,00,000

Debentures Redemption Reserve – ₹ 50,000

Surplus, i.e. Balance in Statement of Profit and Loss – ₹ 3,00,000

On that date, the company decided to transfer ₹ 1,00,000 to Debentures Redemption Reserve.

It also decided to redeem debentures of ₹ 3,00,000 on 30th June, 2016.

Calculation of Specified Securities

Specified Securities

$=3,00,000 \times \frac{15}{100}=Rs.45,000$

Note:

1. Here, the entry for transferring the amount of DRR to General Reserve has been passed with 50% of DRR amount, since the company has not filly redeemed all its debentures. Therefore, 50% of DRR amount

i.e.  50% of 1,50,000 has been transferred to General Reserve

2. As the question was silent, entries for interest on debentures have been ignored. Howerer, these have been provided for reference.

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