Ownclasses

On 1st April, 2008'a company made an issue of Rs. 2,00,000, 6% Debentures of Rs. 100 each, repayable at a premium of 10%. The terms of issue provided for the redemption of 400 debentures every year starting from the end of 31-3-2010 either by purchase from the open market or by draw of lots at the company's option.
On 31-3-2010, the company purchased for cancellation 300 Debentures at 95% and 100 Debentures at 90%.
Pass the necessary Journal entries for the issue and redemption of debentures assuming that the company had already created the Debenture Redemption Reserve A/c by the required amount. 

Answer
                                       Journal Entries

Date

Particulars

LF

Debit(Rs)

Credit(Rs)

1, April, 2008

 

Bank a/c Dr

 

To 6% Debentures application and allotment a/c

 

(Being amount received on issue of 2000 6% debenture @ Rs100 each

 

 

 

200000

 

 

 

 

 

 

 

 

200000

 

20000

 

 

 

 

 

 

 

 

 

 

 

28500

 

 

 

 

 

 

30000

 

 

 

 

 

 

 

 

 

9000

 

 

 

 

 

 



10000

 

 

 

 

200000

 

 

 

 

 

 

 

 

 

 

200000

 

20000

 

 

 

 

 

 

 

 

 

28500

 

 

 

 

 

 

 

28500

 

1500

 

 

 

 

 

 

 

9000

 

 

 

 

 

 

9000

 

1000

 

 

 

 

 

 

6% Debenture application and             

allotment a/c                                     Dr

 

Loss on issue of debenture a/c            Dr

 

                  To 6% debenture a/c

                 

                   To Premium on redemption of debentures a/c                                   

 

(being issue of 2000, 6% debentures of Rs 100 each at par and redeemable at premium)

 

 

Own debentures a/c                             Dr

 

                   To Bank a/c

 ( Being purchase of own 300 debentures of

Rs 100 each @ 95 per debenture)

 

 

6% debenture a/c                               Dr

 

                     To own debentures a/c

 

                      To profit on cancellation of debentures a/c

(being cancellation of 300 debentures of Rs 100 each purchasing at Rs 95 per debenture)

 

 

Own debenture a/c                              Dr

                     

                         To bank a/c

 

(being the purchase of own 100 debentures of Rs 100 each @ Rs 90 per debenture)

 

6% debenture a/c                            Dr

 

                           To own debenture a/c

                         

                           To  profit on cancellation of debentures a/c

 

(being the cancellation of 100 debentures of Rs 100 each by purchasing @Rs 90 per share)