Question

On 31st March, 2016, W Ltd. had the following balances in its books: 9% Debentures – Rs. 6,00,000 Debentures Redemption Reserve – Rs. 50,000 Surplus, i.e. Balance in Statement of Profit and Loss –Rs. 3,00,000 On that date, the company decided to transfer Rs. 1,00,000 to Debentures Redemption Reserve. It also decided to redeem debentures of Rs. 3,00,000 on 30th June, 2016. Pass necessary journal entries in the books of the company. 

Answer 1

Note:

1. Here, the entry for transferring the amount of DRR to General Reserve has been passed with 50% of DRR amount since the company has not fully redeemed. Therefore 50% of DRR amount ie . 50% of 1,50,000 has been transferred to General Reserve.

2. As the question was silent, entries for interest on debentures have ignored. However, there been provided for reference.