Question

On January 01, 2012, X. Ltd. issues 5,000, 8% Debentures of Rs 100 each repayable at par at the end of three years. It has been decided to set up a cumulative sinking fund for the purpose of their redemption. The investments are expected to realise 4% net. The Sinking Fund Table shows that Rs 0.320348 amounts to one rupee @4% per annum in three years. On December 31, 2015 the balance at bank was Rs 2,42,360 and the investments realised Rs 3,25,000. The debentures were paid off. Give journal entries and show ledger account.

Answer 1

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★ When debentures are redeemed out of profit, it is essential that an equal amount to the face value of the debentures redeemed will be transferred to Debenture Redemption Reserve Account.

★ When all the debentures are redeemed, the Debenture Redemption Reserve Account is closed by transferring to General Reserve Account.☺️❤️

Answer 2

When debentures are redeemed out of profit, it is essential that an equal amount to the face value of the debentures redeemed will be transferred to Debenture Redemption Reserve Account.

★ When all the debentures are redeemed, the Debenture Redemption Reserve Account is closed by transferring to General Reserve Account.☺️❤️

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