ISC Class 12th Accountancy Chapter 2 - Issue of Debentures Important Questions with Answers

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Answer briefly of the following question :

State any two reasons for a company to purchase its own debentures from the open market.

Question 2.

On 1st April, 2013, Rayon Ltd. issued 2,000, 9% Debentures of 100 each at a discount of 10%, redeemable
at par on 31st March, 2017. The issue was fully subscribed. To meet the provisions of the Companies Act,
2013, the Board of Directors decided to transfer 30,000 to Debenture Redemption Reserve on 31st March,
2014, and the balance on 31st March, 2015. On 1st April, 2016, the company made the required investment in
government securities.

The investments were encashed and the debentures were redeemed on the due date.
It is the policy of the company to write off capital losses in the year in which they occur.
You are required to pass journal entries for issue and redemption of debentures (ignore interest on
debentures).

Question 3.

On 1^st April, 2016, Krayon Ltd. issued 8,000. 12% Debentures of Rs. 100 each, redeemable at par after 5 years.
The issue was fully subscribed.
According to the terms of issue, interest on debentures is payable annually on 31st March. Tax deducted at
source is 20%.
You are required to pass journal entries for the year 2016-17, regarding issue of debentures and interest on
debentures.

Question 4.

On 1st April, 2012, Neptune Finance Company (a listed NBFC) issued 4,000, 9% Debentures of ? 100 each to be redeemed at a premium of 5% on 31st March, 2021.

You are required to pass necessary journal entries for the issue and redemption of debentures.

Question 5.

Suhas Ltd. issued 1,000, 7% Debentures of ? 100 each to be redeemed after three years at a premium of 5%. The face value of the debentures was payable as:

? 20 on Application

? 30 on Allotment (on 1st May, 2020)

? 30 on First call (on 1st October, 2020)

? 20 on Final call (on 1st January, 2021)

All the debentures were applied and allotted.

Ali, to whom 20 debentures were allotted, paid the allotment money and the two calls on 31st March, 2021. The Articles of Association of the company provided for interest on calls-in-arrear to be charged @ 10% per annum, which Ali paid on 31st March, 2021.

You are required to pass journal entries in the books of Suhas Ltd. to record:

The adjustment and receipt of interest on calls in arrears
The entry to close the interest on calls in arrears account

Question 6.

On 1 st April, 2017, Prasad and Company Limited issued 1,000, 10% Debentures of ? 1,000 each at ? 980. Under the terms of issue, `1/5` of the debentures is annually redeemable by drawings, the first redemption occurring on 31st March, 2019.

On 31st March, 2018, the company had a balance of ? 4,000 in its Capital Reserve A/c. The company wrote off the discount on issue of debentures over the life-time of the debentures.

You are required to prepare the Discount on issue of Debentures Account for the first three years.

Question 7.

Select the correct statement from the following options.

A debenture holder is entitled to receive a dividend on his debentures from the company even if the company has incurred losses.

A debenture holder is entitled to receive interest on his debentures from the company only if the company has made profits.

A debenture holder is entitled to receive interest on his debentures from the company only after a dividend has been paid by the company to its shareholders.

A debenture holder is entitled to receive interest on his debentures from the company even if the company has incurred losses.

Question 8.

On 1st April, 2021, Bhim Ltd. issued 2,000, 5% Debentures of ? 100 each as follows:

(a) For cash at a discount of 5%	? 80,000 (Nominal)
(b) To a vendor for ? 60,000 in satisfaction of his claim	? 70,000 (Nominal)
(c) To Bankers for a loan of ? 40,000 as collateral security	? 50,000 (Nominal)

The interest on these debentures was to be paid annually on 31st March, every year, by the company.

You are required to calculate interest on these debentures payable by the company on 31st March, 2022.

Question 9.

During the year 2021-22 SM Ltd. issued 10,000, 10% Debentures of ? 100 each at a discount of 10% to be redeemed after three years. The company had a balance of ? 60,000 in its Securities Premium Reserve.

What amount will be added under Operating Activities as Discount on Issue of Debentures written off in the Cash Flow Statement of SM Ltd. for the year 2021-22?

? 10,00,000

? 60,000

? 1,00,000

? 40,000

Question 10.

Xylo Ltd. issued 9,000, 7% Debentures of ? 100 each at a certain rate of discount. After writing off the discount on the issue of debentures, the company was left with a balance of ? 35,000 in its Securities Premium out of the original amount of ? 71,000.

At what rate of discount did the company issue these Debentures?

Question 1.

The Balance Sheet of Anjum Ltd. as at 31st March 2022, had outstanding 1,000, 8% Debentures of ? 100 each. These debentures were to be redeemed by the company on 31st March 2023. Give the journal entry for the amount due to the Debenture holders on 31st March 2023, including the interest on debentures due to them.

Question 2.

On 1st April, 2022, Harbour Ltd. issued 50,000, 6% Debentures of ? 100 each to the public at a discount of 5% to be redeemed after three years at a premium of 7%.
On this date, the company also issued 1,00,000 Equity shares of ? 10 each at a premium of ? 2 per share.
Both the issues were fully subscribed.

You are required to prepare the following accounts for the year 2022-23 in the books of Harbour Ltd.:

6% Debentures Account.
Loss on issue of Debentures Account

Question 3.

Gama Ltd. issued 20,000 Equity shares of ? 10 each to the public, payable as follows:

? 2 on Application

? 3 on Allotment (on 1^st November, 2022)

? 5 on First & Final Call (on 1^st March, 2023)

Applications were received for 25,000 shares. The directors of the company accepted applications for 20,000 shares and refunded the application money on the remaining shares.
One shareholder who was allotted 30 shares paid the first and final call with allotment.
Another shareholder did not pay his allotment on 20 shares when due but paid it with the first and final call along with interest on calls-in-arrears.
The directors of the company charged interest on calls-in-arrears at the rate provided in Table F of the Companies Act, 2013. No interest was allowed on calls-in-advance.

You are required to pass journal entries to record the above transactions in the books of Gama Ltd.

Question 4.

On 1st April, 2023, Zara Ltd. issued 10,000, 6% Debentures of ? 100 each at a discount of 5%. On 31st March, 2024, the company had ? 40,000 in its Capital Reserve A/c and ? 30,000 as balance of Securities Premium.

Give the journal entry to write off the discount on the issue of debentures on 31st March, 2024.

Question 5.

On 1st April, 2023, Ruth Ltd. purchased Plant and Machinery for ? 11,00,000 from Pablo Ltd. payable as to ? 1,00,000 by accepting a promissory note and the balance by an issue of 11% Debentures of ? 100 each at a premium of 10% to be redeemed at a premium of 2 % after six years. You are required to pass journal entries in the books of Ruth Ltd. only to record the payment made to Pablo Ltd.

Question 6.

A limited company made an issue, which was fully subscribed, of 2,000, 5% Debentures of ? 100 each at ? 96, to be redeemed at par after five years. The debentures were allotted on 31st May 2023, subscriptions being payable:

15% on application
30% on allotment
30% on 30th June, 2023
Balance on 30th September 2023

One debenture holder holding 100 debentures paid the allotment with the first call along with interest on calls-in-arrears @ 10% per annum.

You are required to:

Give the amounts in rupees payable with:
1. Allotment
2. Second and Final Call
Prepare the Interest-on-Calls in Arrears A/c.

Question 7.

The following balances have been extracted from the books of Nirvana Ltd, as at 31^st March, 2024:

Particulars	(?)	Particulars	(?)
Security deposit for electricity for ten years	30,000	Uncalled amount on partly paid-up shares	8,00,000
Underwriting commission	20,000	10% Debentures	5,00,000
General Reserve	70,000	Statement of P/L (Dr.)	10,000
Fixed Deposits	2,00,000	Calls-in arrears @ ? 1 per share	40,000
Premium on redemption of Debentures	20,000	Securities Premium	2,00,000
Equity Share Capital (1,00,000 shares of ? 10 each)	10,00,000

You are required to show the above items in Notes to Accounts accompanying the Balance Sheet of Nirvana Ltd. prepared as per Schedule III of the Companies Act 2013 as at 31^st March, 2024.