QuestionJournalize the bond debenture redemption of Rs. 5000000 at 10% for ABC Ltd. for the years ending Dec 31, 2020 and 2021.
Studdy Solution
STEP 1
Assumptions1. The outstanding bond debentures amount is Rs.5,000,000. The interest rate is10%
3. The accounting year ends on December314. The debentures were redeemed on December31,20215. The interest is calculated annually, not monthly compounding6. Both the principal amount and interest must be paid at the end of each year
STEP 2
First, we need to find the interest amount on the debentures. We can do this by multiplying the debentures amount by the interest rate.
STEP 3
Now, plug in the given values for the debentures amount and interest rate to calculate the interest.
STEP 4
Convert the percentage to a decimal value.
STEP 5
Calculate the interest amount.
STEP 6
The interest amount is the amount ABC Ltd. needs to pay at the end of the year2020. Journalize this transaction.
Dr. Interest Expense Rs.500,000Cr. Cash/Bank Rs.500,000
STEP 7
At the end of the year2021, ABC Ltd. needs to pay both the interest for the year and the principal amount of the debentures. First, calculate the interest for the year2021.
STEP 8
The total amount to be paid at the end of2021 is the sum of the interest for the year and the principal amount of the debentures.
STEP 9
Plug in the values for the debentures amount and the interest to calculate the total amount.
STEP 10
Calculate the total amount ABC Ltd. has to pay at the end of202.
STEP 11
Journalize the transaction for the payment at the end of202.
Dr. Interest Expense Rs.500,000Dr. Debentures Rs.5,000,000Cr. Cash/Bank Rs.5,500,000
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