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1.	On 1st April, 2011, F Ltd. Issued Rs.40,00,000, 7% Debentures of Rs.100 each at a premium of 5% redeemable at a premium of 10% at the end of 4 years. Investment as required by law was made in fixed depositof the bank on 30th April earning interest @6% p.a. Pass journal entries at the time of Redemption of Debentures.
Answer» Debenture Redemption Reserve created for Rs.10,00,000 on 31st March, 2014. Debenture Redemption Investment Rs.6,00,000 made on 30th April, 2014. Note : Interest on investment will be calculated for 11 months.

2.	SRCC Ltd. has issued on 1st April, 2017, 20,000, `12%` debentures of Rs. 100 each redeemable by draw of lots as under : `{:("During the year ended on 31st March, 2018",,:,15%),("During the year ended on 31st March, 2019",,:,25%),("During the year ended on 31st March, 2020",,:,15%),("During the year ended on 31st March, 2021",,:,25%),("During the year ended on 31st March, 2022",,:,20%):}` How much minimum investment should be made by SRCC Ltd. as per Companies Act, 2013 before redemption of debentures ? When should it be made ?
Answer» `{:("Year Ended on","Time of Investment","Minimum Investment or DRI (Rs)",),("31st March, 2018","On or before 30.4.2017"," 45,000",),("31st March, 2019","On or before 30.4.2018"," 75,000",),("31st March, 2020","On or before 30.4.2019"," 45,000",),("31st March, 2021","On or before 30.4.2020"," 75,000",),("31st March, 2022","On or before 30.4.2021"," 60,000",):}`

3.	Mudra Ltd. Had 10,000, 12% Debentures of Rs.100 each due for redemption at a premium of 5% on March 31, 2018. The Board of Directors of the company decided to transfer the required amount to Debenture Redemption Reserve. Required investment was also made and the debentures were redeemed. Pass necessary journal entries.
Answer» Rs.2,50,000 will be transferred from Surplus in Statement of Profit & Loss to Debenture Redemption Reserve on 31st March 2017. Debenture Redemption Investment made for Rs.1,50,000 on 30th April, 2017.

4.	On 1-1-2010 a Public Limited Company issued 15,000, 10% Debentures of Rs.100 each at par which were repayable at a Premium of 15% on 31-3-2015. On the date of maturity, the company decided to redeem the above mentioned 10% Debentures as per the terms of issue, out of profits. Required investment is made on 30th April, 2014 in fixed deposit bearing interest @8% p.a. Bank deducted TDS @10% on its maturity i.e. 31st March 2015. Pass the necessary journal entries in the books of the Company for the redemption of Debentures.
Answer» Debenture Redemption Reserve Created for Rs.15,00,000. Debenture Redemption Investment Rs.2,25,000, Interest on Investment Rs.16,500. TDS Rs. 1,650.

5.	X Ltd. Wants to redeem 5,000, 5% Debentures of Rs.100 each at 5% premium. How much amount it must transfer to Debenture Redemption Reserve, if it has already a balance of Rs.1,00,000 in Debenture Redemption Reserve Account?A. Rs.4,00,000B. Rs.25,000C. Rs.2,00,000D. Rs.2,50,000
Answer» Correct Answer - B

6.	Debentures can be redeemed :A. By issue of new sharesB. By existing resourcesC. By Accumulated profitsD. By all of the above
Answer» Correct Answer - D

7.	Debentures can be redeemed :A. By annual drawingsB. By purchase in the open marketC. By ConversionD. By all of the above
Answer» Correct Answer - D

8.	Which account is debited for transfer of profit to DRR ?
Answer» Profit & Loss Appropriation A/C is debited for transfer of profit to DRR

9.	What is meant by Redemption of Debentures ?
Answer» Redemption of debentures means payment of the amount of debentures by the company. When debentures are redeemed, liability on account of debentures is discharged. Amount of funds required for redemption of debentures is quite large and, therefore, prudent companies make sufficient provision out of profits and accumulate funds to redeem debentures.

10.	Priya Ltd. Issued 30,000, 8% debentures of Rs.200 each on August 1, 2011 redeemable as follows : `"On 31st March, 2015 6,000 Debentures"` `"On 31st March, 2016 7,000 Debentures"` `"On 31st March, 2017 7,000 Debentures"` `"On 31st March, 2018 10,000 Debentures"` It was decided to transfer Rs.4,00,000 to Debenture Redemption Reserve on March 31, 2012 and March 31, 2013 and balance required to be transferred to Debenture Redemption Reserve on March 31, 2014. Record necessary journal entries. Ignore entries for payment of interest.
Answer» Investment made for Rs.1,80,000 on 30th April, 2014, Rs.30,000 on 30th April 2015 and Rs.90,000 on 30th April 2017 and entire amount of Investment Rs.3,00,000 encashed on 31st March, 2018. Amount transferred to Debenture Redemption Reserve on March 31, 2014 Rs.7,00,000, DRR transferred to General Reserve on 31st March 2015 Rs.3,00,000, On 31st March 2016 Rs.3,50,000, On 31st March 2017 Rs.3,50,000, and On 31st March 2018 Rs.5,00,000.

11.	State the meaning of redemption for debentures out of profit.
Answer» Redemption of debenture out of profits implies that an amount equal to the face value of the debentures redeemed is transferred to DRR. Thus, a part of the profits of company are withheld from distribution to shareholders. Debenture redemption reserve account appears on the liabilities side of the balance sheet. The balance in Debenture Redemption Reserve a/c increases with each redemption. When all the debentures are redeemed, the DRR is closed by transferring its balance to general reserve.

12.	Universe Ltd. Has 2,00,000, 9% debentures of Rs.50 each due for redemption in five equal annual instalments starting from March 31, 2015. Debentures Redemption Reserve has a balance of Rs.17,00,000. Record necessary journal entries.
Answer» Amount transferred to Debenture Redemption Reserve Rs.8,00,000 on 31st March, 2014. Investment made for Rs.3,00,000 on 30th April, 2014 and encashed on 31st March, 2019. One-fifth of DRR will be transferred to General Reserve each time on redemption of one-fifth debentures.