Question 14 Chapter 10 of +2-A - T.S. Grewal 12 Class

Question 14 Chapter 10 of +2-A

14. Apollo Ltd. issued 21,000; 8% Debentures of 100 each on 1st April 2013 redeemable at a premium of 8% on 30th June 2019. The company decided to transfer the required amount to Debentures Redemption Reserve in three equal annual instalment starting with 31st March 2017. The required investment was made in Government Securities on 30th April 2019. Ignore interest on debentures and also an investment. Pass necessary Journal entries regarding the issue, transfer to DRR, investment, and redemption of debentures

The solution of Question 14 Chapter 10 of +2-A: - 

 

Books of Apollo Ltd

Date	Particulars		L.F.	Debit	Credit
2013
Apr. 01	Bank A/c	Dr		21,00,000
	To 8% Debenture Application A/c				21,00,000
	(Being Debenture application money received)
Apr.31	8% Debenture Application A/c	Dr		21,00,000
	Loss on Issue of Debentures A/c	Dr		1,68,000
	To 8% Debentures A/c				21,00,000
	To Premium on Redemption A/c				1,68,000
	(Being Investment cashed and interest received)
2017
Mar 31	Statement of Profit and Loss	Dr		1,75,000
	To Debenture Redemption Reserve A/c				1,75,000
	(Being Profit transferred to Debenture Redemption Reserve)
2018
Mar. 31	Statement of Profit and Loss A/c	Dr		1,75,000
	To Debenture Redemption Reserve A/c				1,75,000
	(Being Profit transferred to Debenture Redemption Reserve)
2019
Mar. 31	Statement of Profit and Loss A/c	Dr		1,75,000
	To Debenture Redemption Reserve A/c				1,75,000
	(Being Profit transferred to Debenture Redemption Reserve)
April 30	Debenture Redemption Investment A/c	Dr		3,15,000
	To Bank A/c				3,15,000
	(Being Investment is made in government securities equal to 15)
June 30	8% Debenture A/c	Dr		21,00,000
	Premium on Redemption Reserve A/c	Dr		1,68,000
	To Debenture holders’ A/c				22,68,000
	(Being Debenture due for redemption along with premium)
	Bank A/c	Dr		3,15,000
	To Debenture Redemption Investment A/c				3,15,000
	(Being Investment made in specified securities Owen cashed )
	Debenture holders’ A/c	Dr		22,68,000
	To Bank A/c				22,68,000
	(Being Payment made to debenture holders)
	Debenture Redemption Reserve A/c	Dr		5,25,000
	To General Reserve A/c				5,25,000
	(Being Debenture Redemption Reserve transferred to General Reserve)

 

Working Notes:
Calculation of Amount transferred to DRR

As prescribed by Section 714 of the Companies Act, 2013, companies are required to create DRR at 25% of the total value of debentures. Here, debentures worth Rs 21,00,000 are to be redeemed, so, the amount of DRR will be:

Amount of DRRRs	21, 00, 000 ×	25
		100
	= 5,25,000

 

Amount Instalments for the three years =	5, 25, 000
	3
	= 1,75,000

 

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Also, Check out the solved question of previous Chapters: -

T.S. Grewal’s Double Entry Book Keeping +2 (Vol. I: Accounting for Not-for-Profit Organizations and Partnership Firms)

• Chapter No. 1 - Financial Statement of Not-For-Profit Organisations
• Chapter No. 2 - Accounting for Partnership Firms - Fundamentals
• Chapter No. 3 - Goodwill: Nature and Valuation
• Chapter No. 4 - Change in Profit-Sharing Ratio Among the Existing Partners
• Chapter No. 5 - Admission of a Partner
• Chapter No. 6 - Retirement/Death of a Partner
• Chapter No. 7 - Dissolution of a Partnership Firm

T.S. Grewal’s Double Entry Book Keeping (Vol. II: Accounting for Companies)

• Chapter No. 8 - Company Accounts -  Accounting for Share Capital
• Chapter No. 9 - Company Accounts - Issue of Debentures
• Chapter No. 10 - Redemption of Debentures

T.S. Grewal’s Double Entry Book Keeping (Vol. II: Accounting for Companies)

• Chapter No. 1 - Financial Statements of a Company
• Chapter No. 2 - Financial Statement Analysis 
• Chapter No. 3 - Tools of Financial Statement Analysis - Comparative Statements and Common- Size Statements
• Chapter No. 4 - Accounting Ratios
• Chapter No. 5 - Cash Flow Statement

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