Class 12 Accountancy

Chapter 2 Solutions — Issue and Redemption of Debentures

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Solutions

Overview

Step-by-step NCERT solutions for Issue and Redemption of Debentures (Chapter 2, CBSE Class 12 Accountancy) — every question and answer worked out in full, not just the final result. You can also read the Issue and Redemption of Debentures textbook chapter.

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What these solutions cover

All 49 questions in Issue and Redemption of Debentures are solved in the PDF. Here's what's inside, exercise by exercise:

Short & Long Answer Questions

What is meant by a Debenture?
What does a Bearer Debenture mean?
State the meaning of 'Debentures issued as a collateral security'.
What is meant by 'Issue of debentures for consideration other than cash'?
What is meant by Issue of debenture at discount and redeemable at premium?
What is 'Capital Reserve'?
What is meant by a 'Irredeemable Debenture'?
What is a 'Convertible Debenture'?
What is meant by 'Mortgaged Debentures'?
What is discount on issue of debentures?
What is meant by 'Premium on Redemption of Debentures'?
How debentures are different from shares? Give two points.
What is meant by redemption of debentures?
Can the company purchase its own debentures?
What is meant by redemption of debentures by conversion?
How would you deal with 'Premium on Redemption of Debentures'?
What is meant by redemption of debentures by 'Purchase in Open Market'?
Explain the different types of debentures.
Distinguish between a debenture and a share. Why debenture is known as loan capital? Explain.
Describe the meaning of 'Debenture Issued as Collateral Securities'. What accounting treatment is given to the issue of debentures in the books of accounts?
Explain the different terms for the issue of debentures with reference to their redemption.
Differentiate between redemption of debentures out of capital and out of profits.
Explain the guidelines of SEBI for creating Debenture Redemption Reserve.
Describe the steps for creating Sinking Fund for redemption of debentures.
Can a company purchase its own debentures in the open market? Explain.
What is meant by conversion of debentures? Describe the method of such a conversion.

Numerical Questions

G. Ltd. a listed company issued 75,00,000, 6% debentures of Rs. 50 each at par payable Rs. 15 on application and Rs. 35 on allotment, redeemable at par after 7 years from the date of issue of debentures. Record necessary entries in the books of Company.
Y. Ltd. issued 2,000, 6% debentures of Rs. 100 each payable as follows: Rs. 25 on application; Rs. 50 on allotment and Rs. 25 on first and final call. Record necessary entries in the books of the company.
A. Ltd. issued 10,000, 10% debentures of Rs. 100 each at a premium of 5% payable as follows: Rs. 10 on Application; Rs. 20 along with premium on allotment and balance on first and final call. The debentures were fully subscribed and all money was duly received. Record necessary Journal entries. Also show how the amount will appear in the balance sheet.
A. Ltd. issued 90,00,000, 9% debentures of Rs. 50 each at a discount of 8%, redeemable at par any time after 9 years. Record necessary entries in the books of A. Ltd., for issue of debentures.
A. Ltd. issued 4,000, 9% debentures of Rs. 100 each on the following terms: Rs. 20 on Application; Rs. 20 on Allotment; Rs. 30 on First call; and Rs. 30 on Final call. The public applied for 4,800 debentures. Applications for 3,600 debentures were accepted in full. Applications for 800 debentures were allotted 400 debentures and applications for 400 debentures were rejected. All money called and…
T. Ltd. offered 2,00,000, 8% debentures of Rs. 500 each on June 30, 2014 at a premium of 10% payable as Rs. 200 on application (including premium) and balance on allotment, redeemable at par after 8 years. But applications are received for 3,00,000 debentures and the allotment is made on pro-rata basis. All the money due on application and allotment was received. Record necessary entries…
X. Ltd. invited applications for the issue of 10,000, 14% debentures of Rs. 100 each payable as to Rs. 20 on application, Rs. 60 on allotment and the balance on call. The company receives applications for 13,500 debentures, out of which applications for 8,000 debentures are allotted in full, applications for 5,000 debentures were allotted 40% of received application, and the remaining…
R. Ltd. offered 20,00,000, 10% debentures of Rs. 200 each at a discount of 7% redeemable at premium of 8% after 9 years. Record necessary entries in the books of R. Ltd.
M. Ltd. took over assets of Rs. 9,00,00,000 and liabilities of Rs. 70,00,000 of S. Ltd. and issued 8% debentures of Rs. 100 each. Record necessary entries in the books of M. Ltd.
10.
B. Ltd. purchased assets of the book value of Rs. 4,00,000 and took over the liability of Rs. 50,000 from Mohan Bros. It was agreed that the purchase consideration, settled at Rs. 3,80,000, be paid by issuing debentures of Rs. 100 each. What Journal entries will be made in the following three cases, if debentures are issued:
- (a) at par;
- (b) at 10% discount;
- (c) at premium of 10%? It was agreed…
X. Ltd. purchased a Machinery from Y. Ltd. at an agreed purchase consideration of Rs. 4,40,000 to be satisfied by the issue of 12% debentures of Rs. 100 each at a premium of Rs. 10 per debenture. Journalise the transactions.
12.
X. Ltd. issued 15,000, 10% debentures of Rs. 100 each. Give journal entries and present it in the balance sheet in each of the following cases:
- (i) The debentures are issued at a premium of 10%;
- (ii) The debentures are issued at a discount of 5%;
- (iii) The debentures are issued as a collateral security to bank against a loan of Rs. 12,00,000; and
- (iv) The debentures are issued to a supplier of…
13.
Journalise the following:
- (i) A debenture issued at Rs. 95, repayable at Rs. 100;
- (ii) A debenture issued at Rs. 95, repayable at Rs. 105; and
- (iii) A debenture issued at Rs. 100, repayable at Rs. 105. The face value of debenture in each of the above cases is Rs. 100.
A. Ltd. issued 50,00,000, 8% debentures of Rs. 100 at a discount of 6% on April 01, 2018, redeemable at premium of 4% by draw of lots as under: 20,00,000 debentures on March, 2020; 10,00,000 debentures on March, 2021; 20,00,000 debentures on March, 2022. Record journal entries for issue of debentures. Prepare discount/loss on issue of debenture account.
15.
A listed company issues the following debentures:
- (i) 10,000, 12% debentures of Rs. 100 each at par but redeemable at premium of 5% after 5 years;
- (ii) 10,000, 12% debentures of Rs. 100 each at a discount of 10% but redeemable at par after 5 years;
- (iii) 5,000, 12% debentures of Rs. 1000 each at a premium of 5% but redeemable at par after 5 years;
- (iv) 1,000, 12% debentures of Rs. 100 each…
A listed company issued debentures of the face value of Rs. 5,00,000 at a discount of 6% on April 01, 2014. These debentures are redeemable by annual drawings of Rs. 1,00,000 made on March 31 each year starting from March 31, 2016. Give journal entries for issue of debentures, writing-off discount and regarding redemption of debentures.
B. Ltd. a listed company issued debentures at 94% for Rs. 4,00,000 on April 01, 2011 repayable by five equal drawings of Rs. 80,000 each. The company prepares its final accounts on March 31 every year. Give Journal entries for issues and redemption of debentures.
B. Ltd. issued 1,000, 12% debentures of Rs. 100 each on April 01, 2014 at a discount of 5% redeemable at a premium of 10%. Give journal entries relating to the issue of debentures and debentures interest for the period ending March 31, 2015 assuming that interest is paid half-yearly on September 30 and March 31 and tax deducted at source is 10%.
Jay Kay Ltd. an 'other listed company' issued 60,000 12% debentures of Rs. 100 each at par redeemable at the end of 5 years at a premium of 20%. On this date, there existed a balance of Rs. 5,00,000 in securities premium reserve account. The company created the required amount of debenture redemption reserve in 3 equal instalments on March 31, 2017, 2018 and 2019. It invested in specified…
Madhur Ltd., has outstanding 9% debentures of Rs. 50,00,000 redeemable at par on January 01, 2020. Debenture Redemption Reserve of Rs. 2,00,000 on March 31, 2018 and balance of required amount of DRR was created on March 31, 2019. The company invested in specified securities (DRI) the required amount on April 01, 2019. Debentures were redeemed on the due date. Record necessary journal entries in…
MK Ltd. has outstanding Rs. 30,000 11% debentures of Rs. 100 each redeemable at 10% premium as follows: March 31, 2018 — 10,000 debentures; March 31, 2019 — 12,000 debentures; March 31, 2020 — Remaining debentures. Pass necessary journal entries in the books of the company.
X Ltd. had outstanding 20,000 12% debentures of Rs. 100 each redeemable on June 30, 2019. Record necessary journal entries at the time of redemption.
XYZ Ltd. Issued 6,000, 12% Debentures of Rs. 50 each on April 1, 2014. Interest on these debentures is payable annually 31st March each year. The debentures are redeemable in four equal installments at end of third, fourth, fifth and sixth year. You are required to pass journal entries at the time of issue and redemption of debentures in the books of the company under following cases: (i)…

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