DK Goel Solutions Class 12 Accountancy Chapter 9 Company Accounts Redemption of Debentures

Short Answer Questions

Question 1.        Shubh Limited has the following balance appearing in its Balance Sheet:

The Company decided to redeem its 9% debentures at a premium of 10%. You are required to suggest the way in which the company can utilise the securities premium amount.

Solution  1         

1.) Utilise Rs. 10,00,000 to write off Underwriting Commission.

2.) Utilise Balance Rs. 12,00,000 to write off Premium on Redemption of 9% Debentures.

                   Numerical Questions

Question 1.      Kaveri Ltd. issued 50,000, 8% Debentures of Rs. 100 each at par on Oct. 1, 2012 redeemable on March 31, 2016. It was decided to invest 15% of the face value of debentures to be redeemed towards Debentures Redemption Investment of 30^th April, 2015. Debentures were redeemed on due date. Record necessary entries for issue and redemption of debentures.

Solution  1

Working Note:-

1.) Interest on Investment is not calculated because rate of interest is not provided.

Question 2.        On 1^st April, 2011. F Ltd. issued Rs. 40,00,000, 7% Debentures of Rs. 100 each at a premium of 5% redeemable at a premium of 10% at the end of 4 years. Investment as required by law was made in fixed deposit of the bank on 30^th April earning interest @6% p.a.

Pas journal entries at the time of Redemption of Debentures.

Solution  2

Question 3.      Bank of Baroda issued 8,000, 8% Debentures of Rs. 100 each at a premium of 6% on 1^st April, 2008 redeemable on 31^st March, 2015. Record necessary entries for issue and redemption of debentures.

Solution  3

Point of Knowledge:-

A Company which is not required to create DRR is exempted from Investing 15% amount also.

Question 4.    AFCON’s India Ltd. (an infrastructure company) issued 5,00,000, 9% Debentures of Rs. 20 each on April 1, 2005 redeemable on March 31, 2015. Investment as required by law was made in fixed deposit of the bank on 30^th April. Record journal entries for issue and redemption of debentures.

Solution  4

Point of Knowledge:-

A Company which is not required to create DRR is exempted from Investing 15% amount also.

Question 5.       On 1^st April, 2013 the following balance appeared in the books of Blue and Green Ltd.: 

12% Debentures (Redeemable on 31^st August, 2015) Rs. 20,00,000

Debenture Redemption Reserve Rs. 2,00,000 

The company met the requirements of Companies Act, 2013 regarding Debenture Redemption Reserve and Debenture Redemption investments and redeemed the debentures.

Ignoring interest on investments, pass necessary Journal entries for the above transactions in the books of company.

Solution  5

Question 6.    Gati Ltd. has issued 30,000, 8% Debentures of Rs. 100 each of which one-third is due for redemption on March 31^st 2018. The company has in its Debenture Redemption Reserve Account a balance of Rs. 3,80,000 on 31^st March, 2017. Required Investment is made in fixed deposit on 30^th April 2017 bearing interest @ 6% p.a. Record the necessary journal entries for the Redemption of Debentures.

Solution  6

Question 7.       On April 1^st,2013 following were the balance of Blue Bird Ltd.:

10% Debentures (redeemable on 31^st March, 2015)  Rs. 30,00,000

Debenture Redemption Reserve Rs. 5,00,000

On 31^st March, 2014the Board of Directors transferred the required amount to DRR and debentures were redeemed.

Investment was made earning interest @ 8% p.a.

Pass necessary Journal entries for the above transactions in the books of the company.

Solution  7

Question 8.    X Ltd. had issued Rs. 8,00,000, 9% debentures which are due to be redeemed out of profit on 1^st Oct., 2015 at a premium of 5%. The company had a Debenture Redemption Reserve of Rs. 4,14,000. The Company invested the required amount in fixed deposit in a Bank on 30^th April, 2015 earning interest at 10% p.a. Pass necessary journal entries for the redemption of debentures.

Solution  8

Question 9.       On 1-1-2010 a Public Limited Company issued 15,000, 10% Debentures of Rs. 100 each at par which were repayable at a Premium of 15% on 31-3-2015. On the date of maturity, the company decided to redeem the above mentioned 10% Debentures as per the terms of issue, out of profits. Required investment is made on 30^th April, 2014 in fixed deposit bearing interest @ 8% p.a. Bank deducted TDS @ 10% on its maturity i.e. 31^st March, 2015.

Pass the necessary journal entries in the books of the Company for the redemption of Debentures. 

Solution  9

Question 10.      X Ltd. issued Rs. 80,00,000, 8% debentures of Rs. 100 each on 1^st April, 2017. The terms of issue stated that the debentures were to be redeemed at a premium of 5% on 30^th June, 2015. The company decided to transfer out of profits Rs. 10,00,000 to Debenture Redemption Reserve on 31^st March, 2014 and Rs. 10,00,000 on 31^st March, 2015.

Pass the necessary Journal entries regarding the issue and redemption of debentures without providing for either the interest on loss on issue of debentures.

Solution  10     

Question 11.   Chandra Tubes Ltd. issued 70,000, 7% debentures of Rs. 100 each on June 30, 2011 redeemable at a premium of 6% on July 1, 2015. The Board of Directors have decided to transfer out of profits Rs. 7,50,000 to Debenture Redemption Reserve on March 31, 2013, Rs. 5,00,000 on March 31, 2014 and Rs. 5,00,000 on March 31, 2015. Record necessary journal entries regarding issue and redemption of debentures. Ignore entries relating to writing off loss on issue of debentures and interest paid thereon. 

Solution  11

Question 12.   Kuber Ltd. on 1^st April 2010 acquired assets of the value of Rs. 7,00,000 and liabilities worth Rs. 80,000 from Varun Ltd. at an agreed value of Rs. 6,30,000. Kuber Ltd. issued 10% Debentures of Rs. 100 each at a premium of 5% in full satisfaction of purchase consideration. The debentures were redeemable on 31^st October, 2015 at a premium of 4%. Pass Journal entries to record the above including redemption of debentures. 

Solution  12

Working Note:-

Calculation of Number of Debentures issued =  = ^6,30,000/₁₀₅ Debentures @ Rs. 100 each.

Question 13.   Universe Ltd. has 2,00,000, 9% debentures of Rs. 50 each due for redemption in five equal annual instalments starting from March 31, 2015. Debenture redemption Reserve has a balance of Rs. 17,00,000. Record necessary journal entries.

Solution  13

Question 14.    Priya Ltd. issued 30,000, 8% debentures of Rs. 200 each on August 1, 2011 redeemable as follows:

On 31^st March 2015                         6,000 Debentures

On 31^st March 2016                         7,000 Debentures

On 31^st March 2017                         7,000 Debentures

On 31^st March 2018                         10,000 Debentures

It was decided to transfer Rs. 4,00,000 to Debenture Redemption Reserve on March 31, 2012 and March 31, 2013 and balance required to be transferred to Debenture Redemption Reserve on March 31, 2014. Record necessary journal entries. Ignore entries for payment of interest.

Solution  14        

Question 15.      Tata Power Ltd. issued 90,000, 9% Debentures of Rs. 100 each on July 1, 2011 redeemable at a premium of 5% as under:

On 31^st March 2015                         6,000 Debentures

On 31^st March 2016                         7,000 Debentures

On 31^st March 2017                         7,000 Debentures

It was decided to transfer to debenture Redemption Reserve Rs. 10,00,000 on March 31, 2012; Rs. 4,00,000 on March 31, 2013 and the balance on March 31, 2014. Record necessary journal entries ignoring for interest.

Solution  15

Question 16.   On 31^st March, 2016 Z Ltd. purchased its own 5,000, 7% Debentures of Rs. 100 each from the open market at Rs. 96 each for immediate cancellation. Pass Journal entries.

Solution  16

Question 17.   X Ltd. purchased from open market its own 2,000, 9% Debentures of Rs. 100 each @ Rs. 102 per debentures for immediate cancellation. Pass Journal entries.

Solution  17

Question 18.      On 1-4-2013 JJJ Ltd. had Rs. 1,00,00,000, 10% Debentures of Rs. 100 each outstanding.

(i) On 1-4-2014 the company purchased in the open market 30,000 of its own debentures for Rs. 99 each and cancelled the same immediately.

(ii) On 28-2-2015 the company redeemed at par debentures of Rs. 50,00,000 by draw of a lot.

(iii) On 31-1-2016 the remaining debentures were purchased for immediate cancellation for Rs. 20,03,000.

Ignoring interest on debentures, investments and debenture redemption reserve, pass necessary Journal entries for the above transactions in the books of the company.

Solution  18

Question 19.   Voltas Ltd. purchased its own 4,000; 8% Debentures of Rs. 100 each @ Rs. 95 per debenture. These debentures were redeemable at 4% premium.

Solution  19

Question 20.    Manu Ltd. purchased from open market its own 5,000, 10% Debentures of Rs. 100 each @ Rs. 112 per debenture for immediate cancellation. These debentures were redeemable at 10% premium. Company has a balance of Rs. 15,000 in Capital Reserve.

Pass necessary Journal entries.

Solution  20

Question 21.      Shashi Ltd. purchased for immediate cancellation its own 3,000, 9% Debentures of Rs. 100 each redeemable at 5% premium for Rs. 109 each. Company has a balance of Rs. 10,000 in its Capital Reserve.

Pass necessary Journal entries.

Solution  21

Question 22.      On 1^st April, 2012, a company issued 2,000, 8% Debentures of Rs. 100 each at a premium of Rs. 20, repayable at a premium of Rs. 20. The terms of issue provided for the redemption of Rs. 20,000 debentures every year commencing from 31^st March, 2014 either by purchase from the open market or by draw of lots at company’s option.

On 31^st March, 2014, the company purchased for cancellation its own debentures of the face value of Rs. 16,000 at Rs. 95 per debenture and of Rs. 4,000 at Rs. 90 per debenture.

Show the Journal entries for redemption of debentures.

Ignore entries relating DRR and Investment.

Solution  22

Question 23.      Z Ltd. purchased for cancellation 2,000 of its own debentures of Rs. 100 each for Rs. 1,86,000 and 1,000 Debentures for Rs. 95,000. Expenses of purchases amounted to Rs. 1,500.

Pass Journal entries ignoring DRR and Investment.

Solution  23

Question 24.      On 1^st April, 2016 a company made an issue of 5,000, 15% Debentures of Rs. 100 each. The terms of issue provided for the redemption of Rs. 1,00,000 Debentures annually, commencing from 31^st March, 2018, either by drawing at drawings at par or by purchase in the market at the company’s option.

The Company transferred the required amount to DRR on 31^st March 2017 and invested the required amount on 30^th April 2017.

On 31^st March, 2018 the company purchased for cancellation 300 of its debentures at Rs. 95; 200 at Rs. 96 and 250 at Rs. 98. The expenses of purchase amounted to Rs. 230.

Record the redemption of debentures in the company’s Ledger for the year 2017-18 including interest on debentures.

Solution  24

Question 25.      On 1^st April, 2013 a company made an issue of 20,000, 8% debenture of Rs. 100 each at Rs. 106 per debenture. The terms of issue provided for the redemption of Rs. 5,00,000 debentures every year commencing from 31^st March, 2018 either by purchase or by drawings at par at the company’s option.

Company transferred the required amount to DRR and invested the required amount as per law.

On 31^st March, 2018 the company purchased for cancellation debentures of the face value of Rs. 3,00,000 at Rs. 90 per debenture and of Rs. 2,00,000 at Rs. 95 per debenture. Journalise the above transactions and show how the profit on redemption would be treated.

Solution  25

Working Note:-

(i) Calculation of Amount paid for the purchase of debentures:

3,000 debentures × Rs. 90 per Debenture = Rs. 2,70,000

2,000 debentures × Rs. 95 per Debenture = Rs. 1,90,000

Total payment = Rs. 4,60,000

Question 26.    India Tea Ltd. purchased for cancellation its 800, 13% Debentures of Rs. 100 each at Rs. 95 (i) Make journal entries, (ii) What journal entry will be made if debentures are purchased as investments.

Ignore entries relating to DRR and investment of 15% amount.

Solution  26

Question 27.   Mafatlal Cotton Ltd. has an outstanding balance of 5,000, 9% debentures of Rs. 100 each. The Board of Directors decided to purchase 4,000 of its own debentures at a price of Rs. 94 for investments purpose. But after few months they took decision to sell them @ Rs. 97 in the market. Record necessary entries to show above transactions.

Solution  27

Question 28.     X Ltd. purchased its 5,000, 8% debentures of Rs. 100 at Rs. 95 for investment on 1^st October, 2014. Expenses amounted to Rs. 4,000. On 1^st January, 2015 it sold 4,000 of its debentures at Rs. 98 per debenture. Expenses amounted to Rs. 3,000. On 31^st March, 2015 it decided to cancel the rest of the debentures.

Journalise these transaction in the book of X Ltd.

Solution  28

Question 29.      On 1^st April 2014, Nikita Ltd. had 10,000, 12% Debentures of Rs. 100 each. On the same date it purchased 3,000 of its own debentures from the open market for Rs. 2,95,000, expenses of purchase being Rs. 500.

The debentures were held as investment till 31^st March, 2015 when it decided to cancel them. Interest is payable half yearly on 31th September and 31^st March and the books are closed on 31^st March every year.

Pass journal entries in the books of the company.

Solution  29

Question 30.   Malwa Textiles Ltd. issued 2,000, 7% debentures of Rs. 500 each redeemable after 5 years by converting them into equity shares of Rs. 100 each. Record Journal entries for issue and redemption of debentures. 

Solution  30

Question 31. (A)         India Cable Ltd. issued 60,000, 9% debentures of Rs. 50 each at a premium of 5% on March 1, 2012 redeemable by conversion of debentures into shares of Rs. 20 each at a premium of Rs. 4 per share on May 31, 2015. Record necessary entries for issue and redemption of debentures.

Solution  31 (A)   

Question 32. (B)             On 28-2-2015, BCL Ltd. converted its 1,00,000, 9% debentures of Rs. 100 each issued at a premium of 10% into 8% preference shares of Rs. 100 each issued at a premium of 25%. Pass necessary journal entries on the redemption of debentures.

Solution  32 (B)

Working Note:-

(i) Conversion of Debentures into Preference Shares:-

Amount of Debentures = Rs. 2,50,000

Amount of Preference Share = Rs. 10 + Rs. 12.5

Question 33.      Z Ltd. issued Rs. 20,00,000, 8% debentures on 1^st April, 2010 at a premium of 5%. On March, 2015, out of these Rs. 2,00,000, 8% debentures were redeemed by converting them into equity shares of Rs. 100 each issued at par and Rs. 5,00,000, 8% debentures were converted into 10% preference shares of Rs. 100 each issued at a premium of 25%.

Pass the necessary Journal entries in the books of Z Ltd. for the redemption of debentures.

Solution  33

Question 34.      Vasudev Ltd. redeemed its 25,000, 8% Debentures of Rs. 100 each as follows:

(i) 15,000 Debentures by converting them into equity shares of Rs. 20 each at a premium of 25%.

(ii) Balance 10,000 Debentures were redeemed out of Profits.

Solution  34

Question 35.       Rose Ltd. issued 8,400, 8% Partly Convertible Debentures of Rs. 100 each. As per the terms of issue it redeemed 25% of the face value of debenture in cash and the balance were redeemed by issue of 10% Preference Shares of Rs. 100 each at a Premium of 5%.

Pass necessary journal entries.

Solution  35        

Question 36.   X Ltd. redeemed its 3,800, 10% Debentures of Rs. 100 each, which were issued at a discount of 6% by converting into 12% debentures of Rs. 100 each at a discount of Rs. 5 per debenture. Journalise.

Solution  36

Question 37.   Y Ltd. redeemed its 46,000, 9% Debentures of Rs. 25 each, which were issued at a premium of 4% by converting into 11% Debentures of Rs. 100  each, issued at 92%. Journalise.

Solution  37

Question 38.      Journalise the redemption of debentures before maturity in the following cases:

(i) 4,500, 9% debentures of Rs. 100 each issued at a discount of 4% and redeemable at par after 5 years were converted into 12% Debentures of Rs. 100 each issued at par before maturity. 

(ii) 4,500, 9% debentures of Rs. 100 each issued at a discount of 4% and redeemable at par after 5 years were converted into 12% debentures of Rs. 100 each issued at a premium of 25% before maturity. 

(iii) 4,500, 9% debentures of Rs. 100 each issued at a discount of 4% and redeemable at par after 5 years were converted into 12% debentures of Rs. 100 each issued at a premium of 25% before maturity. 

(iv) 4,500, 9% debentures of Rs. 100 each issued at a discount of 4% and redeemable at par after 5 years were converted into 12% debentures of Rs. 100 each issued at a premium of 25% before maturity.

Solution  38

Question 39.   X Ltd. redeemed Rs. 20,00,000, 7% Debentures of Rs. 100 each which were issued at a discount of 5% and were redeemable at 10% premium by converting them into 9% Debentures of Rs. 100 each issued at a discount of 20% Journalise.

Solution  39        

Question 40.   Suruchi Ltd. issued 4,000, 9% debentures of Rs. 500 each at a discount of 5% redeemable after 5 years by conversion into equity shares of Rs. 10 each at Rs. 25 per share. Record necessary entries for issue and redemption of debentures assuming that the debentures were converted at the option of debenture Holders before the date of redemption.

Solution  40        

Question 41.      Journalise the following transactions:

(i) A Ltd. redeemed 1,000, 13% Debentures of Rs. 500 each which were issued at a discount of 10% by converting them into equity shares of Rs. 10 each at par.

(ii) B Ltd. redeemed 600, 15% Debentures of Rs. 100 each which were issued at a discount of 2% by converting them into equity shares of Rs. 10 each at a premium of Rs. 5 per share.

All of the above debentures were converting at the option of the debenture holders before the date of redemption.    

Solution  41

Question 42.      On 1^st April, 2014 a limited company issued 250, 12% debentures of Rs. 1,000 each at Rs. 950. Holders of these debentures have an option to convert their holding into 10% Preference Shares of Rs. 100 each at a premium of Rs. 25 per share at any time within two years.

On 31^st March, 2015 a year’s interest had accrued on the debentures and remained unpaid. A holder of 20 debentures notified his intention to exercise the above option.

Pass necessary journal entries.

Solution  42

Question 43.      Jain Motors Ltd. converted its 200, 8% debentures of Rs. 100 each issued at a discount of 6% into equity shares of Rs. 10 each, issued at a premium of 25%. Discount on issue of 8% debentures has not yet been written off.

Showing your working notes clearly pass necessary Journal Entries on conversion of 8% debentures into equity shares assuming that the debentures are converted before maturity.

Solution  43        

Question 44.      Govarai Ltd. issue 10,000, 10% Debentures of Rs. 100 each at Rd. 96 each, redeemable after five years at a premium of 10% by conversion into Equity Shares of Rs. 10 each at a premium of 20%. The company had the option to convert the debentures into share earlier than five years. The company converted the debentures into share at end of third year. It had a balance of Rs. 2,00,000 in Securities Premium Reserve against which Loss  on issue of debentures was written off in the first year.

Pass the journal entries for issue, redemption of debentures and writing off loss on issue of Debenturs.

Solution  44

Question 45.      On 1^st April, 2014 X Ltd. issued 6,000, 8% debentures of Rs. 100 each at a discount of 5%. The debentures were redeemable after 5 years or earlier at the option of the company by converting them into equity share of Rs. 20 each at a premium of 50%. On 1^st April, 2018, the company converted the debenture into shares.

Pass the Journal entries for issue and conversion.

Solution  45

Question 46.      On 1^st April 2014 Krishna Ltd. issued 1,600, 8% debentures of Rs. 500 each at a discount of 5% redeemable at a premium of 6% after 5 years or earlier at the option of the company by conversion into equity shares Rs. 10 each at a premium of Rs. 15 per share. On 1^st April 2017 the company converted the debentures into shares.

Pass necessary journal entries for issue and conversion of debentures.

Solution  46

Question 47.    On 1^st April, 2015 X Ltd. issued 8,000, 8% Debentures of Rs. 50 each at a discount of 5% redeemable at par after 5 years and other the holder option to convert their holdings into equity shares of Rs. 25 each at a premium of 60% after 31^st march, 2018. On 1^st April, 2018, 40% holders exercised their option. Give necessary Journal entries both at the time of issue and at the time of conversion.

Solution  47

Question 48.     On 1^st April, 2013, Z Ltd. issued 15,000, 9% Debentures of rs. 100 each at 92% and redeemable at 4% premium after 8 years and offered the holder’s option to convert their holdings into equity shares of Rs. 10 each at a premium of Rs. 30 each, after 31^st March, 2018. On 1^st April, 2018 holders of 3,000 debentures exercised their option. Pass necessary Journal entries both at the time of issue and the time of conversion. 

Solution  48        

Question 49.      On 1^st April, 2015 Z Ltd. issued 5,000, 10% debentures of Rs. 200 cash at a discount of 6% and redeemable at a premium of 4% after 5 years. It offered the holder’s option to convert their holdings into the Equity Shares Rs. 20 each at par. On 31^st March, 2018 all the debenture holders exercised their option.

Pass the Journal entries for issue of debentures, writing off loss on issue and conversion into shares.

Solution  49

Question 50.      On 1^st April, 2014, PQuestion  Ltd. issued 5,000, 9% debentures of Rs. 100 each at Rs. 95 each and redeemable at a premium of 7% after 6 years. It offered the holders option to convert their holdings into Equity Shares of Rs. 10 each at par. On 31^st March, 2018 holders of 20% debentures exercised their option.

Pass the Journal entries for issue of debentures, writing off loss on issue and conversion into shares.

Solution  50

Question 51.   AH Ltd. issued Rs. 20,000; 9% debentures of Rs. 100 each at a discount of 10% redeemable after five years by converting them into equity shares of Rs. 10 each. Pass necessary Journal entries for the issue and redemption of debentures.

Solution  51        

Question 52.     On 1^st April, 2014 a company issued 500, 15% Debentures of Rs. 1,000 each at par repayable at 5% premium. Holders of these debentures had an option to convert their debentures into 10% Preference Shares of Rs. 100 each at a premium of Rs. 20 per share at any time within 2 years. On 31^st March, 2015 a year’s interest had accrued on the debentures but remained unpaid and a holder of 60 debentures notified his intention to exercise his option. Pass the necessary journal entries.

Solution  52

Working Note:-

(i) Conversion of Debentures into Preference Shares:-

Amount of Debentures = Rs. 60,000 + Rs. 3,000 (5% on Premium) = Rs. 63,000

Amount of Preference Share = Rs. 100 + Rs. 20

Number of Equity Shares =  ⁶³⁰⁰⁰/₁₂₀ = 525

Amount of Equity Share Capital = 525 × Rs. 100 = Rs. 52,500

Amount of Security Premium =  525 × Rs. 20 = Rs. 10,500  

Question 53.  (A)          On 1^st October, 2014 a limited company gave notice of its intention to its intention to redeem its outstanding Rs. 20,00,000, 10% debentures on 31^st March, 2015 at 102% and offered the holders the following options:

(a) To apply the redemption money to subscribe for;

(i) 12% cumulative preference shares of Rs. 100 each at Rs. 112.50 per share (accepted by the holders of Rs. 8,55,000 debentures).

(ii) 15% debentures of Rs. 100 each at 96% (accepted by the holders of Rs. 7,20,000 debentures).

(b) To have their holding redeemed for cash if neither of the options under (a) was accepted.

Show the journal entries necessary to record he redemption allotment under options (a) (i) and (a) (ii) and state the amount of cash required to satisfy option (b).

Ignore depositing or investing the amount at the beginning of the year.

Solution  53 (A)

Question 53. (B)               On 1^st October, 2011 Mohan Agro Ltd. issued 5,000, 14% Debentures of Rs. 100 each. One of the conditions of issue was that the debentures could be redeemed by giving six months’ notice at any time after three years at a premium of 4%, either by payment in cash or by allotment of Equity Shares or other debentures according to the option of the debenture holders.

On 1^st October, 2014 the company informed the debentures holders to redeem the debentures on 1^st April, 2015 either by payment in cash or by allotment of equity shares of Rs. 10 each at Rs. 13 per share or 15% 2^nd Debentures of Rs. 100 each at Rs. 96 per debenture.

Holders of 600 debentures agreed to take immediate cash payment; holders of 2,000 debentures accepted the offer of equity shares and the rest accepted the offer of 15% 2^nd Debentures.

Give Journal Entries to record the redemption of debentures.

Ignore depositing or investing the amount at the beginning of the year.

Solution  53 (B)

Question 54.      Pass necessary journal entries in the books of Rachana Ltd. for the following:

(i) Converted 740, 9% debentures of Rs. 100 each into equity shares of Rs. 100 each issued at a premium of 25%.

(ii) Issued 1,875, 8% debentures of Rs. 100 each ata a premium of Rs. 10 each redeemable after three year.

Solution  54

Question 55.      Pass necessary journal entries in the books of Varun Ltd. for the following transations:

(i) Issued 58,000, 9% debentures of Rs. 1,000 each at a premium of 10%.

(ii) Converted 350, 9% debentures of Rs. 100 each into equity shares of Rs. 10 each issued at a premium of 25%.

Solution  55

Question 56.      Pass necessary journal entries for the redemption of debentures for the following in the books of X Ltd.

X Ltd. converted Rs. 8,00,000, 12% debentures into equity shares of Rs. 100 each at a premium of 24%.

Solution  56

Question 57.   Mudra Ltd. had 10,000, 12% Debentures of Rs. 100 each due for redemption at a premium of 5% on March 31, 2018. The Board of Directors of the company decided to transfer the required amount to Debenture Redemption Reserve. Required investment was also made and the debentures were redeemed.

Solution  57

Question 58.   Anupama Ltd. had issued 20,000, 9% Debentures of Rs. 100 each which is due for redemption on 31^st March 2018. The company has in its Debenture Redemption Reserve Account a balance of Rs. 4,00,000. Record the necessary journal entries for the Redemption of Debentures.

Solution  58

Question 59.     Ruchi Ltd. issued 42,000, 7% debentures of Rs. 100 each on 1^st April, 2011, redeemable at a premium of 8% on 31^st March, 2015. The Company decided to create required Debenture Redemption Reserve on 31^st March, 2014. The Company invested the funds as required by law in a fixed deposit with State Bank of India on 1^st April, 2014 earning interest @ 10% per annum. Tax was deducted at source by the bank on interest @ 10%. Pass necessary Journal Entries regarding issue and redemption of debentures.

Solution  59        

Question 60.   Saraswati Ltd. issued 8,000, 9% debentures of Rs. 200 each at premium of 5% on June 30, 2005, redeemable on July 1, 2015. The Board of Directors decided to transfer Rs. 2,00,000 to Debenture Redemption Reserve on March 31, 2014 and on March 31, 2015. Record necessary entries for the issue as well as at the time of redemption of debentures. Ignore entries for payment of interest.

Solution  60      

Question 61.   Pooja Ltd. issued 80,000, 8% debentures of Rs. 100 each on June 30, 2011 redeemable at a premium of 6% on July 1, 2015. The Board of Directors have decided to transfer out of profits Rs. 12,00,000 to Debentures Redemption Reserve on March 31, 2013, Rs. 4,00,000 on March 31, 2014 and Rs. 4,00,000 on March 31, 2015. Record necessary journal entries regarding issue and redemption of debentures. Ignore entries relating to writing off loss on issue of debenture and interest paid thereon.

Solution  61      

Question 62.      ABC Ltd. Purchased for cancellation its own 5,000, 9% Debentures of Rs. 100 each for Rs. 95 per debenture. The brokerage charges Rs. 15,000 were incurred.

Calculated the amount to be transferred to Capital Reserve.

Solution  62               

Question 63.      On 1^st April, 2015 a company issued 10,000, 9% debentures of Rs. 100 each at a premium of 5%. The terms of issue provide for redemption of Rs. 1,00,000 worth Debentures every year commencing from March, 2018 either by purchasing in the open market or by draw of lots at the company’s option.

The company transferred the required amount to DRR and invested the required amount as per law. On 31^st March, 2018 the company purchased 400 debentures @ Rs. 95 and 500 Debentures @ Rs. 96 for cancellation and redeemed the balance of Rs. 10,000 debentures by draw of loss. Journalise these transactions and also show how you would deal with the profit on redemption of debentures.

Solution  63      

Question 64.   A Ltd. purchased for cancellation rs. 2,50,000 of its 12% Debentures at Rs. 92. The brokerage being 1%. Journalise.

Solution  64    

Question 65.      Y Ltd. issued 6,000, 13% Debentures of Rs. 100 each on 1^st April, 2013 at par. The terms of Debentures Trust Deed provided for the redemption of Rs. 1,50,000 annually commencing from March, 2018 either by drawings at par or by purchase in the open market at the company’s option.

The Company transferred the required amount to DRR and invested the required amount as per Law.

On 31^st March, 2018 the Company purchased Rs. 1,20,000 of its Debentures at Rs. 95 and incurred the brokerage @ 2%. Prepare necessary accounts for the year 2017-18.

Solution  65   

Question 66.      On 1^st April, 2012, X Ltd. made an issue of 8,000, 11% debentures of Rs. 100 each. According to the terms of issue, debentures of the terms of issue, debentures of the face value of Rs. 1,00,000 are to be redeemed annually commencing from March, 2018, either by drawings at par or by purchase in the open market.

The Company transferred the required amount to DRR and invested the required amount as per law.

On 31^st March, 2018 the Company purchased for cancellation Rs. 50,000 debentures at Rs. 96 and Rs. 30,000 debentures at Rs. 95 and redeemed the balance by draw of lots. The expenses on purchase amounted to Rs. 1,200.

Prepare necessary accounts for the year ending 31^st March, 2018. 

Solution  66

Question 67.      On 1-4-2011, X Ltd. issued 500, 13% Debentures of Rs. 100 each at par redeemable at par and offered the holders option to convert their holdings into equity shares of Rs. 10 each at par after 31-3-2016.

On 1-4-2016, 30% holders exercise their option. Give journal entries on 1-4-2016.

Solution  67

Question 68.      On 1-4-2011, Y Ltd. issued 500, 13% Debentures of 100 each at par redeemable at par and offered the holders option to convert their holding into equity shares of Rs. 10 each at 20% premium after 31-3-2016.

On 1-4-2016, 60% holders exercised their option. Give journal entries on 1-4-2016.

Solution  68

Question 69.      On 1-4-2011, Z Ltd. issued 600, 13% Debentures of Rs. 100 each at par redeemable at par and offered the holders option to convert their holdings into equity shares of Rs. 10 each at a premium of Rs. 6 each after 31-3-2016.

On 1-4-2016, 80% holders exercised their option. Give journal entries on 1-4-2016.

Solution  69

Question 70.      On January 1, 2013, Rhytm Limited issued, 10% debentures of Rs. 500 each at par. Debentures are redeemable after 7 years. However, the company gave an option to debenture holders to get their debentures converted into equity shares of Rs. 100 each at a premium of Rs. 25 per share any time after the expiry of one year.

Shivansh, holder of 200 debentures, informed on Jan.1, 2015 that he wanted to exercise the option of conversion of debentures into equity shares.

The company accepted his request and converted debentures into equity shares.

Pass necessary journal entries to record the issue of debentures on Jan. 1, 2013 and conversion of debentures on Jan. 1, 2015.

Solution  70

Question 71.   On 1-4-2010, A ltd. issued Rs. 1,00,000, 12% Debentures of Rs. 100 each at par redeemable at 5% premium after 6 years. It offered the holders option to convert their holdings into equity shares of Rs. 10 each at par after 31-3-2016. On 1-4-2016, 50% holders exercised their option. Give journal entries on 1-4-2016.

Solution  71

Question 72.   On 1-4-2016, B Ltd. issued Rs. 5,00,000, 11% Debentures of Rs. 100 each at par redeemable at a premium of 5% after 6 years. If offered the holders option to convert their holding into equity shares of Rs. 10 each at Rs. 14 after 31-03-2016. On 1-4-2016, 20% holders exercised their option. Give journal entries on 1-4-2016. 

Solution  72

Question 73.      On 1-4-2010, C Ltd. issued Rs. 4,00,000, 13% Debentures of Rs. 100 each at par redeemable at 102% and offered the holders option to convert their holdings into 15% Debentures at 96% after 31-3-2016, the holders of Rs. 1,72,800 Debentures exercised their option. Give journal entries on 1-4-2016.

Solution  73

Question 74.      Pass necessary Journal entries in the books of the company in the following cases for redemption of 3,000, 12% Debentures of Rs. 10 each issued at par:

(a) Debentures redeemed at par by conversion into 10% preference shares of Rs. 50 each

(b) Debentures redeemed at a premium of 5% by conversion into equity shares issued at par.

(c) Debentures redeemed at a premium of 10% by conversion into equity shares issued at premium of 20%.

Solution  74

Question 75.      On 1-4-2011, Raja Ltd. issued 1,000, 9% debentures of Rs. 100 each, 40% of these debentures were redeemable at the end of 3^rd year by converting them into Equity Shares of Rs. 100 each at par. The remaining debentures were redeemable at the end of 4^th year by converting the same into Equity Shares of Rs. 100 each issued at a premium of 25%.

Pass necessary journal entries in the books of the company for the issue and Redemption of Debentures.

Solution  75

Question 76.     X Ltd. redeemed 100 6% Debentures of Rs. 100 each by converting them into Equity Shares of Rs. 100 each. The 6% Debentures were redeemable at 10% premium for which the Equity Shares were issued at 25% premium. Pass the necessary Journal entries for the redemption of above mentioned debentures in the books of X Ltd.

Solution  76

Question 77.   On 1-4-2011, D Ltd. issued 800, 13% Debentures of Rs. 100 each at Rs.95 and offered the holders to convert their holdings into equity shares of Rs. 10 each at par after 31-03-2015. On 1-4-2015, 60% holders exercised their option. Give journal entries on 1-4-2015, assuming that the debentures were converted before the date of redemption.

Solution  77

Question 78.      On 1-4-2011, E Ltd. issued 2,000, 13% Debentures of Rs. 500 each at a Rs. 450 and offered the holders to convert their holdings into equity shares of Rs. 100 each at 125 per share after 31-3-2015. On 1-4-2015, 20% holders exercised their option. Give journal entries on entries on 1-4-2015, assuming that the debentures were converted before the date of redemption.

Solution  78       

Question 79.      Journalise the following transaction in the books of Sun Ltd.

100, 12% Debentures of Rs. 100 each issued at a discount of 10% were converted into 10% preference shares of Rs. 100 each issued at a premium of 25%. The Debentures were converted at the option of the debenture holders before the date of redemption.

Solution  79

Question 80.      On 1.4.2010 X Ltd. issue 1,00,000 8% debentures of Rs. 100 each at a discount of 5% redeemable after 5 years by converting them into equity shares of Rs. 100 each issued at a premium of 25%.

Pass necessary journal entries for the issue and redemption of debentures.

Solution  80        

Question 81.      On 1^st April, 2014, X Ltd. issued 5,000, 9% Debentures of Rs. 100 each at 93% redeemable at par after 7 years and offered the holders option to convert their holding into equity shares of Rs. 40 each at a premium of 25% after 31^st March, 2018. On 1^st April, 2018, 30% holders exercised their option. Give necessary Journal entries both at the time of issue and at the time of conversion.

Solution  81