Issue and Redemption of Debentures quiz

Debenture holders are:

Interest on debentures is calculated on:

Debentures issued at Rs 95 and redeemable at Rs 105 (face value Rs 100) give a loss on issue per debenture of:

Premium on redemption of debentures is a:

When debentures are issued as collateral security, the account debited is:

Interest on debentures is:

Debentures that are payable to the person whose name appears in the register of debenture holders are:

Loss on issue of debentures is first written off from:

1,000 debentures of Rs 100 each issued at a premium of 10% to a vendor discharge a purchase consideration of:

Convertible debentures are those which:

State two differences between debentures and shares with respect to return and voting rights. (2 marks)

Pass the journal entry for issue of 1,000, 10% debentures of Rs 100 each at par, payable in full on application. (2 marks)

What is debenture suspense account? How is it shown in the Balance Sheet? (2 marks)

What is meant by redemption of debentures? Name two methods of redemption. (2 marks)

Why do companies sometimes issue debentures at a discount and redeem them at a premium? (2 marks)

Under which heads are (i) 9% debentures redeemable after five years and (ii) loss on issue of debentures not yet written off (to be written off after twelve months) shown in the Balance Sheet? (2 marks)

Pass the journal entry for deduction of TDS on interest on debentures. (2 marks)

Why is the interest on debentures payable even if the company suffers a loss? (2 marks)

What is meant by issue of debentures for consideration other than cash? Give one example. (2 marks)

Distinguish between redeemable and irredeemable debentures. (2 marks)

A company issued 2,000, 12% debentures of Rs 100 each at a discount of 10%, redeemable at a premium of 5%. Calculate the loss on issue, the amount received and pass the issue entry. (3 marks)

Calculate the annual interest, TDS at 10% and net interest on 8,000, 11% debentures of Rs 100 each. Interest is paid half-yearly; calculate the half-yearly net payment. (3 marks)

Mahi Ltd purchased machinery for Rs 3,80,000 and paid Rs 20,000 in cash and the balance by issuing 9% debentures of Rs 100 each at a discount of 10%. Calculate the number of debentures issued and the discount. (3 marks)

A company issued 10,000, 9% debentures of Rs 100 each at par, redeemable at a premium of 8% after five years. It has Securities Premium of Rs 30,000. Calculate the loss on issue and show how much is written off from Securities Premium and from the Statement of Profit and Loss. (3 marks)

A company redeemed 3,000, 10% debentures of Rs 100 each at a premium of 5% at the end of the fifth year. Calculate the amount paid to debenture holders and pass the journal entries for redemption due and payment. (3 marks)

Read the passage and answer the questions. Kalpana Ltd needed Rs 1 crore for a new plant. It issued 1,00,000, 9% debentures of Rs 100 each payable in full on application. Applications were received for 1,30,000 debentures. The directors refunded money to applicants for 30,000 debentures. (i) Is this undersubscription or oversubscription? (ii) Pass the entries for receipt of application money and refund. (iii) Pass the entry for allotment of debentures. (5 marks)

Read the passage and answer the questions. Neo Ltd took a loan of Rs 8,00,000 from Canara Bank and, as additional security, issued 9,000, 10% debentures of Rs 100 each to the bank as collateral. Interest on the loan is paid regularly. (i) Pass the entry for issue of debentures as collateral security. (ii) Show the presentation in the Balance Sheet if the company follows the second method (no entry). (iii) Is interest payable on the debentures issued as collateral? Explain. (5 marks)

Read the passage and answer the questions. Omega Ltd issued 5,000, 8% debentures of Rs 100 each at a premium of 5%, redeemable at a premium of 10% after six years. (i) Calculate the amount received on issue. (ii) Calculate the loss on issue. (iii) Pass the journal entry for issue. (5 marks)

Read the passage and answer the questions. Ruby Ltd purchased a running business from Sun Traders with assets of Rs 9,00,000 and liabilities of Rs 1,50,000 for a purchase consideration of Rs 8,00,000. The consideration was paid by a cheque of Rs 1,00,000 and the balance by 10% debentures of Rs 100 each at a premium of 25%. (i) Calculate the goodwill or capital reserve. (ii) Calculate the number of debentures issued. (iii) Pass the entry for issue of debentures to the vendor. (5 marks)

Read the passage and answer the questions. An investor bought deep discount bonds of face value Rs 1,00,000 for Rs 60,000. The bonds carry no interest and will be redeemed at face value after five years. (i) What type of debenture is this? (ii) What is the investor's total return? (iii) How does the company account for the discount? (5 marks)

Explain the various types of debentures with a chart classifying them on five bases. State one advantage of each type to the company or the investor. (6 marks)

Explain the six conditions of issue and redemption of debentures. Pass journal entries for each assuming 1,000 debentures of Rs 100 each, a premium or discount of 10% where applicable. Draw a chart summarising them. (6 marks)

Explain the accounting treatment of interest on debentures, including TDS, payment of TDS to the government and transfer of interest to the Statement of Profit and Loss. Illustrate with 10,000, 9% debentures of Rs 100 each with TDS at 10%, and draw a flowchart of the entries. (6 marks)

Explain the two methods of recording issue of debentures as collateral security, pass entries under each, and show the Balance Sheet presentation in prose form. (6 marks)

Explain the methods of redemption of debentures: lump sum, instalments, purchase in the open market and conversion. Draw a chart comparing them and pass the journal entries for redemption in lump sum at a premium. (6 marks)