CBSE Class 12 Accountancy HOTs Issue And Redemption of Debentures
Q. 1. Sun Ltd. issued 1000 8% debentures of Rs. 1000 each as fully paid to Star Ltd. as consideration for a machinery purchased. Pass necessary journal entries.
Soln:
Soln: (i) Bank loan raised
Bank a/c Dr.
Bank loan a/c
(Raising of bank loan)
(ii) Issue of debenture as collateral security
Method 1
No journal entry is made in the books because the
debentures will become above only when the loan is
not repaid.
Method 2
Debenture syspense a/c Dr.
X% debentures a/c
(Issue of debentures as collateral security)
3. Identify the terms of issue and redemption of debentures from the given journal entries and write appropriate narrations, for debentures having a face value of Rs. 1000.
Soln: Case I: Issued at premium and redeemable at par Narrations : (a) The issue of 2,000 debentures of Rs. 1,000 each at Rs. 1,050.
(b) The debentures due for redemption.
(c) The amount paid on redemption
Case II: Issued at par and redeemable at premium Narrations:
(a) The issue of 2000 debentures of Rs. 1000 each and redeemable at Rs. 1,050.
(b) The debentures along with premium due for redemption
(c) The amount paid on redemption.
Q.4. New India Ltd. has outstanding 1,100 10% debentures of Rs. 200 each. On April 1, 2005, the Board of Directors have decided to purchase 20% of own debenture for cancellation at Rs. 200 each. Record necessary entries for the same.
Soln:
Q.5. On 1st January, 2006, the company purchased de- bentures of the face value of Rs. 2,00,000 for Rs. 1,97,800 in the open market, held them as investments for one year and then cancelled them.
Q.6. Traders Ltd. issued on 1st Jan. 2004, 5000, 8% Debentures of Rs. 100 each at a discount of 5%. They are repayable after 5 years at a premium of 5%. All the debentures have been subscribed. Pass entry on 1st Jan 2004.
Q.8. XYZ Ltd. issued 10,000 12% debentures of Rs. 100 each at par. They are redeemable at a premium of 5% after six years. Pass entries at the time of issue of debentures and at the time of redemption of debentures.
