Issue and Redemption of Debentures Accountancy - Issue and Redemption of Debentures

Which of the following statement is true?

1. A minor cannot be admitted as a partner.
2. A minor can be admitted as a partner, only into the benefits of the partnership.
3. A minor can be admitted as a partner but his rights and liabilities are same of adult partner.
4. None of the above.

From the point of view of tenure, the debentures are classified as:

1. Secured and unsecured Debentures
2. Redeemable Debentures and Irredeemable Debentures
3. Convertible Debentures and Non-convertible Debentures
4. Registered Debentures and Bearer Debentures

Profit on sale of debenture redemption fund investments in the first instance is credited to:

1. Debenture redemption fund account.
2. Profit and loss appropriation account.
3. General reserve account.

The balance of sinking fund investment account after the realisation of investments is transferred to:

1. Profit and loss account.
2. Debentures account.
3. Sinking fund account.

Company should created DRR equivalent to _____% of the amount of debenture issue before redemption of debenture can commence.

1. 75
2. 40
3. 50
4. 25

'Good Blankets Ltd.' are the manufacturers of woollen blankets. Blankets of the company are exported to many countries. The company decided to distribute blankets free of cost to five villages of Kashmir Valley destroyed by the recent floods. It also decided to employ 100 young persons from these villages in their newly established factory at Solan in Himachal Pradesh. To meet the requirements of funds for starting its new factory, the company issued 50,000 equity shares of ₹ 10 each and 2,000 8% debentures of ₹ 100 each to the vendors of machinery purchased for ₹ 7,00,000.
Pass necessary journal entries for the above transactions in the books of the company. Also, identify any one value which the company wants to communicate to the society.

BPL Ltd. converted 500, 9% debentures of ₹ 100 each issued at a discount of 6% into equity shares of ₹ 100 each issued at a premium of ₹ 25 per share. Discount on issue of 9% debentures has not yet been written off.
Showing your working notes clearly, pass necessary journal entries for conversion of 9% debentures into equity shares.

Pass necessary journal entries in the following cases:

1. Sunrise Ltd. converted 500, 9% debentures of ₹ 100 each issued at a discount of 10% into equity shares of ₹ 100 each issued at a premium of 25%.
2. Britannia Ltd. redeemed 3,000, 12% debentures of ₹ 100 each which were issued at a discount of ₹ 10 per debenture by converting them into equity shares of ₹ 100 each, ₹ 90 paid up.

Disha Ltd. purchased machinery from Nisha Ltd. and paid to Nisha Ltd. as follows:

1. By issuing 10,000, equity shares of ₹ 10 each at a premium of 10%.
2. By issuing 200, 9% debentures of ₹ 100 each at a discount of 10%.
3. Balance by accepting a bill of exchange of ₹ 50,000 payable after one month.

Pass necessary journal entries in the books of Disha Ltd. for the purchase of machinery and making payment to Nisha Ltd.

Pass the necessary journal entries for the issue and redemption of Debentures in the following cases;

1. 15,000, 9% Debentures of ₹ 250 each issued at 5% premium, repayable at 15% premium.
2. 2,00,000, 12% Debentures of ₹ 10 each issued at 8% premium, repayable at par.

Sarvottam Ltd. decided to redeem its 1250, 12% Debentures of ₹ 100 each. It purchased 850 Debentures from the open market at ₹ 96 per Debenture. The remaining Debentures were redeemed out of profit. The company has already made a provision for Debenture Redemption Reserve in its books.
Pass necessary Journal entries in the books ofthe company for the above transactions.

Shakti Ltd decided to redeem its 750, 12% Debentures of ₹ 100 each. The company purchased 500 Debentures at ₹ 94 per Debenture from the open market:
The remaining debentures were redeemed out of profits. The company had already made a provision for Debenture Redemption Reserve in its books.
Pass necessary Journal Entries in the books of the company for the above transactions.

On 1.4.2018 Roshni Ltd. had ₹ 50,00,000, 9% debentures of ₹ 100 each outstanding.

1. On 1.4.2014 the company purchased in the open market 20,000 of its own debentures at ₹ 98.50 each and cancelled the same immediately.
2. On 1.10.2014 the company redeemed at par debentures of ₹ 16,00,000 by draw of a lot.
3. On 31.3.2015 the remaining debentures were purchased for cancellation for ₹ 9,98,000.

Ignoring interest on debentures and debenture redemption reserve, pass necessary journal entries for the above transactions in the books of Roshni Ltd.

'Ananya Ltd.' had an authorized capital of ₹ 10,00,00,000 divided into 10,00,000 equity shares of ₹ 100 each. The company had already issued 2,00,000 shares. The dividend paid per share for the year ended 31.3.2007 was ₹ 30. The management decided to export its products to African countries. To meet the requirements of additional funds, the finance manager put up the following three alternate proposals before the Board of Directors:

1. Issue 47,500 equity shares at a premium of ₹ 100 per share.
2. Obtain a long-term loan from bank which was available at 12% per annum.
3. Issue 9% debentures at a discount of 5%.

After evaluating these alternatives the company decided to issue 1,00,000, 9% debentures on 1.4.2008. The face value of each debenture was ₹ 100. These debentures were redeemable in four instalments starting from the end of third year, which was as follows:

Year	Amount
III IV V VI	10,00,000 20,00,000 30,00,000 40,00,000

Prepare 9% debenture account from 1.4.2008 till all the debentures were redeemed.

On 1.4.2013 JMR Ltd. had 20,000, 9% debentures of ₹ 100 each outstanding.

1. On 1.4.2014 the company purchased in the open market 6,000 of its own debentures for ₹ 98 each and cancelled the same immediately.
2. On 28.2.2015 the company redeemed at par debentures of ₹ 10,00,000 by draw of a lot.
3. On 1.3.2016 the remaining debentures were purchased for immediate cancellation for ₹ 3,99,000.

Ignoring interest on debentures and debenture redemption reserve, pass necessary journal entries for the above transactions in the books of JMR Ltd.

Assertion (A): Discount/Loss issue of Debentures is written off in the year debentures are allotted.
Reason (R): Discount/Loss on issue of Debentures is written off from Securities Premium and Statement of Profit and Loss as finance cost in the year debentures are allotted.

Assertion (A): Interest on Debentures is payable to Debentureholder by the company whether the company earns profits or incur losses.
Reason (R): Interest on Debentures is an expense.

Assertion (A): Debentures saves income tax.
Reason (R): Interest on debentures is a tax deductible expenditure.

Assertion (A): Issue of debenture doesn't result in dilution of control of equity shareholders.
Reason (R): Debenture holders have voting rights.

Statement I: Excess of Net Assest over purchase consideration at the time of purchase of business is credited to Capital Reserve.
Statement II: Excess of purchase consideration over Net Assets at the time of purchase of business is debited to Goodwill account.

Statement I: As per terms of issue, debenture may be redeemed at par, at premium or at a discount.
Statement II: Premium on redemption of debentures is shown under Security Premium in Balance Sheet.

Statement I: X Ltd. has outstanding 15,000, 8% debentures of ₹100 each which were issued at 10% discount. Interest payable will be ₹1,08,000 being 8% of ₹13,50,000.
Statement II: X Ltd. will pay interest on debentures of ₹1,20,000 being 8% of ₹15,00,000 because interest is paid on the nominal value of debentures.

Statement I: Interest is paid by company on Debentures issued as collateral security.
Statement II: Interest on debentures issued as collateral security is paid on nominal of debentures.

Statement I: Premium on issue of debentures is a capital gain for the company.
Statement II: Loss on issue of debentures is a revenue loss.