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Question 35 Chapter 10 of +2-Part-1
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35. (Comprehensive) On 1st January 2015 a listed company made an issue of 500, 10% Debentures of Rs. 1,000 each at Rs. 960 per debentures. The terms of issue provided for the redemption of Rs. 20,000 debentures every year commencing from 2016 either by purchase or by drawings at par at the company’s option Rs. 5,000 was also written off the Discount on Debentures in each of the year 2015 and 2016.
During 2016, the company purchased for cancellation Debentures of the face value of RS. 8,000 @ Rs. 950 and of Rs. 12,000 @ Rs. 900. Journalise the above transactions and also show how the profit on redemption would be treated.
The solution of Question 35 Chapter 10 of +2 Part-1:-
| Journal |
|||||
| Date | Particulars |
L.F. | Debit ₹ | Credit ₹ | |
| 2015 | |||||
| Jan. 1 | Bank A/c | Dr. | 4,80,000 | ||
| Discount on Debenture A/c | Dr. | 20,000 | |||
| To Debenture Sinking Fund A/c | 5,00,000 | ||||
| (Being issue of 500 debentures @ Rs. 960) | |||||
| Dec. 31 | Interest on Debentures A/c | Dr. | 50,000 | ||
| To Bank A/c | 50,000 | ||||
| (Being interest paid on debentures ) | |||||
| Dec. 31 | Statement of profit & Loss | Dr. | 55,000 | ||
| To Discount on Debenture A/c | 5,000 | ||||
| To Interest on debentures A/c | 50,000 | ||||
| (Being part of discount & interest transferred to P&L A/c ) | |||||
| 2016 | |||||
| Dec. 31 | Interest on debentures A/c | Dr. | 50,000 | ||
| To Bank A/c | 50,000 | ||||
| (Being interest paid on debentures ) | |||||
| Dec. 31 | 10% Debenture A/c | Dr. | 20,000 | ||
| To Bank A/c | 18,400 | ||||
| To Profit on Red. of Deb. A/c | 1,600 | ||||
| (Being purchase & cancellation of Debentures) | |||||
| Profit on Red. Of Deb. A/c | Dr. | 1,600 | |||
| Statement of profit & Loss | Dr. | 3,400 | |||
| To Discount on Debenture A/c | 5,000 | ||||
| (Being discount written off & profit on Red. Transferred to P&L A/c ) | |||||
| Statement of profit & Loss | Dr. | 50,000 | |||
| To Interest on Debenture A/c | 50,00 | ||||
| (Being interest on debentures transferred to P& L A/c ) | |||||
Working Note :-
| 1. Debentures purchased for cancellation | ||
| 8,000 X 950 | = 7,600 | |
| 1,000 | ||
| 12,000 X 900 | = 10,800 | |
| 1,000 | ||
| Total Payment | = 18,400 | |
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It all about Question 35 Chapter 10 of +2-Part-1, If you have any problem please comment below.
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Redemption of Debentures – explained with an example
You can also Check out the solved question of other Chapters: –
Usha Publication – Accountancy PSEB (Class 12) – Volume I – Solution
- Chapter No. 1 – Accounting Not for Profit Organisations
- Chapter No. 2 – Partnership Accounts – I (Introduction)
- Chapter No. 3 – Partnership Accounts – II (Goodwill: Nature and Valuation)
- Chapter No. 4 – Partnership Accounts – III (Reconstitution of Partnership)
- Chapter No. 5 – Partnership Accounts – IV (Admission of A Partner)
- Chapter No. 6 – Partnership Accounts – V (Retirement and Death of A Partner)
- Chapter No. 7 – Partnership Accounts – VI (Dissolution of Partnership Firm)
- Chapter No. 8 – Company Accounts (Share Capital)
- Chapter No. 9 – Company Accounts (Issue of Debentures)
- Chapter No. 10 – Company Accounts (Redemption of Debentures)
Usha Publication – Accountancy PSEB (Class 12) – Volume II – Solution
- Chapter No. 1 – Financial Statements of a Company
- Chapter No. 2 – Financial Statement Analysis
- Chapter No. 3 – Tools of Financial Statement Analysis- Comparative and Common Size
- Chapter No. 4 – Ratio Analysis
- Chapter No. 5 – Cash Flow Statement