CBSE Class 12 Accountancy Accounting For Debentures Assignment

Question. The nominal and book values of debenture redemption fund investments account are respectively Rs 1,00,000 and Rs 96,000. The company sold investments of nominal value of Rs 30,000 at a price which was just sufficient to redeem debentures of Rs 30,000 at 10% premium, the profit on sale of investment is
a) Rs 4,200
b) Rs 3,000
c) Nil
d) Rs 5,000

Answer : A

Question. If debentures are issued at premium, then they can be redeemed at
a) par
b) premium
c) Both (a) and (b)
d) can’t be redeemed

Answer : C

Question. A company wants to issue debentures in the upcoming month. For the issue, the company has to create debenture trust deed. But the accountant of the company does not know its meaning. Tell the meaning of debenture trust deed.
a) It shows the list of debentureholders
b) It protects the interest of debentureholders
c) It is created after public subscription
d) It tells that in case of losses, there will be no interest

Answer : B

Question. Own debentures are those debentures of the company which
a) the company allots to its own promoters
b) the company allots to its director
c) the company purchases from the market and keeps them as investments
d) None of the above

Answer : C

Question. Loss on issue of debentures is written-off out of
a) securities premium reserve
b) general reserve and statement of profit and loss account
c) Both (a) and (b)
d) discount on issue of debentures account

Answer : C

Question. Company can utilise premium received on issue of debentures for which purpose?
a) Writing-off discount allowed on issue
b) For writing-off preliminary expenses
c) Both (a) and (b)
d) None of the above

Answer : C

Question. Profit on cancellation of own debentures is transferred to
a) statement of profit and loss
b) debenture redemption reserve
c) capital reserve
d) None of the above

Answer : C

Question. X Ltd. issued 10,000, 8% debentures of Rs 10 each, payable on application and redeemable at par at any time after 6 years. Record the entries for the application money received in the books of X Ltd.
a) Bank A/c                  Dr          80,000
         To Debenture Application and
               Allotment A/c                             80,000
b) Bank A/c                  Dr          1,00,000
               To Debenture Application
                 and Allotment A/c                     1,00,000
c) Debenture Application and
    Allotment A/c       Dr          1,00,000
           To 8% Debentures A/c                       1,00,000
d) None of the above

Answer : B

Question. ‘X’ Limited purchased the assets from ‘Y’ Limited from Rs 16,20,000. ‘X’ Limited issued 10% debentures of Rs 10 each at 10% discount against the payment. The number of debentures issued by ‘X’ Limited will be
a) 16,200
b) 18,000
c) 1,80,000
d) 1,62,000

Answer : C

Question. Goel Ltd. invited applications for issuing 6,000, 12% debentures of Rs 100 each at a premium of Rs 50 per debenture. The full amount was payable on application. Applications were received for 8,000 debentures.
Applications for 2,000 debentures were rejected and application money was refunded. Debentures were allotted to the remaining applicants. Based on the information, pass the journal entry for adjusting the application money received in the books of Goel Ltd.
a) Bank A/c                        Dr                   12,00,000
         To Debenture Application
                     and Allotment A/c                                 12,00,000
b) Debenture Application
     and Allotment A/c           Dr                   9,00,000
                    To 12% Debentures A/c                           9,00,000
c) Debenture Application
    and Allotment A/c            Dr                12,00,000
                     To 12% Debentures A/c                           6,00,000
                     To Securities Premium Reserve A/c           3,00,000
                     To Bank A/c (2,000 × 150)                       3,00,000
d) None of the above

Answer : C

Question. Which of the following alternatives are available for the company at the time of oversubscription?
(i) Pro-rata (ii) Rejection of excess application Alternatives
a) Only (i)
b) Only (ii)
c) Both (a) and (d)
d) None of these

Answer : C

Question. Debentures may be issued …… .
a) for cash
b) for consideration other than cash
c) as collateral security
d) All of these

Answer : D

Question. Firewall agreed to pay purchase consideration of Rs1,30,000 by issuing fully paid-up debentures of Rs 100 at Rs 120. How many debentures will be issued?
a) 1,083
b) 1,084
c) Can’t be determined
d) None of these

Answer : A

Question. A company ‘Vansh Ltd.’ has purchased an asset costing Rs 22,00,000. Vendor issued 10% debentures of Rs 100 each at 10% premium as consideration against asset purchased. Calculate number of debentures to be issued.
a) 26,000 debentures
b) 24,000 debentures
c) 20,000 debentures
d) 22,000 debentures

Answer : C

Question. When debenture amount is received in lumpsum, ……… is credited with bank account.
a) debenture application and allotment account
b) debenture account
c) debenture allotment account
d) None of the above

Answer : A

Question. During the year 2019-20, Network 10 Ltd. issued 12% debentures of Rs 100 each as per the details given. A machine was purchased for Rs 2,18,500. The Vendor was paid by the issue of 1,900 debentures at a premium of 15%, to be redeemed at par. The entry for the payment will be
a) Machinery A/c                Dr               2,18,500
                To Vendor’s A/c                                     2,18,500
b) Vendor’s A/c                  Dr               2,18,500
                To 12% Debentures A/c                         1,90,000
    To Securities Premium
                Reserve A/c                                           28,500
c) Vendor’s A/c                   Dr               2,18,500
                To Machinery A/c                                    2,18,500
d) 12% Debentures A/c      Dr                1,90,000
    Securities Premium
    Reserve A/c                   Dr                28,500
                To Vendor’s A/c                                       2,18,50

Answer : B

Question. Discount on issue of debentures is
a) capital loss
b) capital income
c) revenue loss
d) revenue income

Answer : A

Question. Name the sub-head under which the ‘premium on redemption of debentures’ appears in the balance sheet?
a) Shareholders’ fund
b) Non-current liabilities
c) Long-term borrowings
d) None of the above

Answer : C

Question. Name the account to which the amount of premium received on the issue of debentures wil be credited?
a) Premium on redemption of debentures account
b) Security premium reserve account
c) % debentures account
d) None of the above

Answer : B

Question. A company AB Ltd issued 12% debentures of Rs 10,00,000 of Rs 100 each to public. In the terms of issue, these debentures are redeemable after 10 months ending on 31st January, 2022. These debentures will be shown in balance sheet as on 31st March, 2021 under the heading
a) long-term liability
b) current liability
c) fixed assets
d) current assets

Answer : B

Question. The balance of sinking fund investment account after the realisation of investments is transferred to
a) statement of profit and loss
b) debentures account,
c) sinking fund account
d) None of the above

Answer : C

Question. The following journal entry appears in the books of X Co. Ltd.
Bank A/c                                 Dr 4,75,000
Loss on Issue of Debenture A/c Dr 75,000
              To 12% Debentures A/c               5,00,000
              To Premium on Redemption of
                 Debenture A/c                         50,000
Debentures have been issued at a discount of
a) 15%
b) 5%
c) 10%
d) 20%

Answer : B

Question. Discount on issue of debentures is shown under the following head in the balance sheet.
a) Statement of profit and loss
b) Other non-current assets
c) Debentures account
d) None of the above

Answer : B

Question. Profit on sale of debenture redemption fund investments in the first instance is credited to
a) debenture redemption fund account,
b) statement of profit and loss,
c) general reserve account
d) None of the above

Answer : A

Question. When debentures are redeemed out of profits, an equal amount is transferred to
a) general reserve
b) debenture redemption reserve
c) capital reserve
d) debenture redemption investment

Answer : B

Question. A company had issued debentures and DRR is made as required by law. Accountant is of the view that this DRR is to be transferred into capital reserve because this is a profit in the nature of capital.
Tell him that DRR is to be transferred to .......... at the end of redemption.
a) capital reserve
b) profit and loss account
c) general reserve
d) None of these

Answer : C

Question. X Co Ltd. purchased assets worth Rs 28,80,000. It issued debentures of Rs 100 each at a discount of 4 per cent in full satisfaction of the purchase consideration. The number of debentures issued to vendor is
a) 30,000
b) 28,800
c) 32,000
d) 40,000

Answer : A

Question. When debentures are issued at a discount, which of the following accounts is debited at the time of issue?
a) Debentures account
b) Securities premium reserve
c) Discount on issue of debentures
d) None of the above

Answer : C

Question. Arihant Ltd. issued 8,000, 12% debentures of Rs 100 each at par on 1st April, 2020 which are redeemable at 5% premium in five equal instalments. First redemption to be made on 31st March, 2021. The company complied with legal requirements. Calculate amount which is required to be legally invested?
a) Rs 1,20,000
b) Rs 24,000
c) Rs 60,000
d) Rs 96,000

Answer : B

Question. Excess value of net assets over purchase consideration at the time of purchase of business is credited to
a) general reserve
b) capital reserve
c) vendors’ account
d) Both (a) and (b)

Answer : B

 

LEARNING OBJECTIVES

I) Understand the meaning and features of debentures.

II) Differentiate between shares and debentures.

III) Understand different classes of debentures

IV) Journal entries regarding issue of debentures for cash and for consideration other than cash.

V) Accounting treatment of debentures issued as collateral security

VI) Accounting treatment of issue and redemption of debentures at par, discount and at premium.

VII) Understand the methods of redemption of debentures.

VIII) Accounting treatment of redemption of debentures out of capital and profit.

IX) Understand the redemption of debentures by purchase in the open market

X) Understand redemption of debentures by conversion into shares and new debentures.

1) What do you meant by Debentures? Debentures is an instrument of debt owned by a company as an acknowledgement of debt, such measurements are issued under the seal of company and duly signed by authorized signatory.

2) Write any four types of debentures

i) Redeemable debentures

ii) Perpetual Debentures

iii) Convertible debentures

i) Secured debentures

3) What is debenture Trust Deed? Debenture trust deed is a document created by the company whereby trustee is appointed to protect the interest of debenture holders before they are offered for public subscription.

4) What is meant by convertible debentures? Convertible debentures are those, the holders of which are given an option to exchanging the amount of their debentures with equity shares or other securities after a specified period.

5) Why is premium on the issue of debentures considered as a capital profit? Premium on the issue of debentures is considered a capital profit because it is not an income arising from the normal course of business operations.

6) Explain deep discount Bond When debentures are issued without interest rate and issue price is thereby discounted, the issue of debenture is said to have been made as deep discount bond.

 

Please refer to attached file for CBSE Class 12 Accountancy Accounting For Debentures Assignment