Question

Venus Ltd. had 9,000, 9% Debentures of ₹ 100 each due for redemption. These debentures are to be redeemed in 3 equal installments (starting from 31st March,2015) at a premium of 10%. The company had a balance of ₹ 25,000 in the Debentures Redemption Reserve.
Pass necessary entries for redemption of debentures assuming that company transfer the balance of DRR to General Reserve after redeeming all the debentures.

Answer 1

The necessary journal entries for redemption of debentures assuming that company transfer the balance of DRR to General Reserve after redeeming all the debentures are prepared below:

Explanation:

Given,

Venus Ltd. had 9,000, 9% Debentures of ₹ 100 each due for redemption.

These debentures are to be redeemed in 3 equal installments (starting from 31st March,2015) at a premium of 10%.

The company had a balance of ₹ 25,000 in the Debentures Redemption Reserve.

Amount transferred to DRR

$=9,00,000 \times \frac{25}{100}=2,25,000$

Existing Balance = Rs 25,000

Net Amount Transferred

$=2,25,000-25,000=2,00,000$

Amount transferred to DRI

$=9,00,000 \times \frac{15}{100}=1,35,000$

(in three equal instalments of 45,000 each)

The necessary journal entries for redemption of debentures assuming that company transfer the balance of DRR to General Reserve after redeeming all the debentures are prepared below: