Page 180 - DCOM201_ACCOUNTING_FOR_COMPANIES_I

Unit 8: Methods of Redemption–I

third year (b) the Debentures are redeemable in equal annual drawings in the fourth year. Notes
Assuming the calendar year to be the accounting year of Seema Ltd., ignore the treatment of loss
on issue of debentures and interest thereon.
Solution:
(a) If the debentures are redeemed in lump sum at the end of third year:

Date Particulars L.F.
2001
Jan. 1 Bank Account Dr. 1,80,000
Loss on Issue of Debentures Account Dr. 30,000
To 12% Debentures Account 2,00,000
To Premium on Redemption of Debentures Account 10,000
(Being issue of debentures at discount and redeemable at premium)
2004
Dec. 31 12% Debentures Account Dr. 2,00,00
Premium on Redemption of Debentures Account Dr. 10,000
To 12% Debenture-holders’ Account 2,10,000
(Being amount due to debenture-holders on redemption)
Dec. 31 12% Debenture-holders’ Account Dr. 2,10,000
To Bank Account 2,10,000
(Being payment made to Debenture-holders on redemption)
(b) If debentures are redeemed by equal annual drawings:
Date Particulars L.F.
2001
Jan. 1 Bank Account Dr. 1,80,000
Loss on Issue of Debentures Account Dr. 30,000
To 12% Debentures Account 2,00,000
To Premium on Redemption of Debentures Account 10,000
(Being issue of 12% debentures at discount and redeemable at
premium)
2001
Dec. 31 12% Debentures Account Dr. 50,000
Premium on Redemption of Debentures Account Dr. 2,500
To Debenture-holders’ Account 52,500
(Being amount due to debenture-holders on redemption)
Debenture-holders’ Account Dr. 52,500
To Bank Account 52,500
(Being payment made to debenture-holders)
2002
Dec. 31 12% Debentures Account Dr. 50,000
Premium on Redemption of Debentures Account Dr. 2,500
To Debenture-holders’ account 52,500
(Being amount due to debenture-holders on redemption)
Debenture-holders’ Account Dr. 52,500
To Bank Account 52,500
(Being amount paid to debenture-holders on redemption)
2003
Dec. 31 12% Debentures Account Dr. 50,000
Premium on Redemption of Debentures Account Dr. 2,500
To Debenture-holders’ Account 52,500
(Being amount due to debenture-holders on redemption)
Debenture-holders’ account Dr. 52,500
To Bank Account 52,500
(Being amount paid to debenture-holder)
LOVELY PROFESSIONAL UNIVERSITY 173
2004
Dec. 31 12% Debentures Account Dr. 50,000
Premium on Redemption of Debentures Account Dr. 2,500
To Debenture-holders’ account 52,500
(Being amount due to debenture-holders on redemption)
Debenture-holders Account Dr. 52,500
To Bank Account 52,500
(Being amount paid to debenture-holders)