Chapter : Redemption of Debentures

Illustration 8:
Noida Toll Bridge Corporation Ltd. has outstanding 50,000, 8% debentures of Rs.100 each issued in
2005 due for redemption on March 31, 2015. It was decided to invest the required amount in
investment earning 10% p.a. Interest on April 30th, 2014. Company decided to create debentures
redemption reserves @ 25%. Record necessary entries regarding redemption on debentures.

Solution:
Date No. Particulars Dr.(Rs.) Cr.(Rs.)
2014
April 30 1 Debenture Redemption Investment A/c. Dr. 7,50,000
To Bank A/c 7,50,000
[Being investment made @ 15% of the face value
of debentures to be redeemed]

2015
March 31 2 Bank A/c Dr. 8,18,750
To Debenture Redemption Investment A/c 7,50,000
To Interest Earned A/c ( for 11 months ) 68,750
[Being investment encashed]

March 31 3 Profit & Loss A/c Dr. 12,50,000

To Debenture Redemption Reserve A/c 12,50,000
[Being transfer of profit equal to 25% of the
nominal value of debentures issued]

March 31 4 8% Debentures A/c Dr. 50,00,000

To Debentureholders A/c 50,00,000
[Being amount due to debentureholders on
redemption]

March 31 5 Debentureholders A/c Dr. 50,00,000

To Bank A/c 50,00,000
[Being amount due to debentureholders paid]
 March 31 6 Debenture Redemption Reserve A/c Dr. 12,50,000
To General Reserve A/c 12,50,000
[Being transfer of DRR on redemption of all the
debentures]

THE END!!!!