Question

R Ltd. issued 10,000, 8% Debentures of 100 each at a discount of 5%, redeemable at a premium of 10% after 5 years. State the amount of Debenture Redemption Reserve required to be created by R Ltd. before redemption.
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Answer 1

Answer:

For example

Explanation:

There is no need for creation of DRR because these debentures are fully convertible.

(b) DRR would be created for non-convertible part of debentures.

Amount Required to be transferred to DRR=25% of Face value of Debentures(Non-convertible)                                                                     =25% of Rs 5,00,000(20,00,000×25%)=Rs 1,25,000