On 1st January, 2007 A Ltd made an issue of 10,000 12% debentures of Rs. 100/-
each at Rs.98/- per debenture. According to the terms of issue, commencing from
2008. The company should redeem 500 debentures either by purchasing them
from the open market or by drawing lots at par at the company's option. Profit of
any, an redemption is to be transfered to capital reserve. The company's
accounting year ends on 31st December. Interest is payable on 30th June and 31st
During 2007, the company wrote off Rs.5,000/- from debenture discount account.
During 2008, the company purchased and cancelled the debentures as given
(a) Rs. 20,000 at Rs. 97 per debenture on 30th June, and
(b) Rs. 30,000 at Rs. 96 per debenture on 31st December.
Give the journal entries in the books of A Ltd. for both the years and show
how these items will appear in the financial statements for 2008, giving the
corresponding figures for the previous year.