NOTES


CA-Foundation > Principles and Practice of Accounting > Company Accounts - Issue of Debentures >


Company Accounts - Issue of Debentures Notes

  1. Distinguish between debentures and shares.

  2. Country Crafts Ltd. issued 1,00,000, 8% debentures of Rs.100 each at premium of 5% payable fully on application and redeemable at premium of Rs.10 Pass necessary journal entries at the time of issue.

  3. Koinal Chemicals Ltd. issued 20,00,000, 10% debentures of Rs.50 each at premium of 10%, payable as Rs.20 on application and balance on allotment. Debentures are redeemable at par after 6 years. All the money due on allotment was called up and received. Record necessary entries when premium money is included in allotment money
  4. Kapil Ltd. issued 50,000, 12% Debentures of Rs.100 each at a premium of 10% payable in full on application by 1st March, 2017. The issue was fully subscribed and debentures were allotted on 9th March, 2017. Pass necessary Journal Entries (including cash transactions).

  5. On 1st April 2017 Sheru Ltd. issued 1,00,000 12% debentures of Rs.100 each at a discount of 5%, redeemable on 31 March 2022. Issue was oversubscribed by 20,000 debentures, who were refunded their money. Interest is paid annually on 31 March. You are required to prepare:

    i) Journal Entries at the time of issue of debentures.

    ii) Discount on issue of Debenture Account

    iii) Interest account and Debenture holder Account assuming TDS is deducted @ 10%.

  6. Akshay Ltd. issued 2,000 8% Debentures of Rs. 100 each at a discount of 5% on 1st April, 2008 redeemable after 10 years. Amount was payable as:

    On Application on or before 30.04.2008 Rs. 20.

    On Allotment on or before 30.06.2008 Rs. 25

    On First & Final Call on or before 31.08.2008 Rs. 50.

    Issue was fully subscribed & paid for, give Journal entries & show treatment of discount for three years ending 31st March, 2011. 

  7. Amit Ltd. issued 5% Debentures of Rs. 100 each to the extent of Rs. 1,00,000 at Rs. 104 payable Rs. 14 on application is including premium and the balance on allotment the premium on issue of debentures is to be carried to General Reserve. 

  8. Rakesh Ltd issued 1,000 5% Debentures of Rs. 100, each repayable at the end of 10th year. Pass journal entries in the books of Rakesh Ltd. presuming that

    They were issued @ 5% discount & repayable at par

    They were issued at par & repayable at premium of 4%

    They were issued @ 5% discount & repayable at 4% premium

    They were issued @ 5% premium & repayable at par. 

  9. Akshar Ltd issues 10,000, 10% Secured Debentures of Rs. 100 each. Give journal entries if the debentures are redeemable at par and are issued.

    At par

    At discount of 2%

    At a premium of 3%

    And also show the entries which will be made if the debentures are redeemable at a premium of 5% and are issued a) at par b) at a discount of 2%

    Also show in each case, how the figure will appear in the Balance Sheet. 

  10. Amit Ltd. issued 1,000, 12% Debentures of Rs.100 each, payable Rs. 20 on application and the balance on allotment. Applications were received for 1,500, debentures out of which application for 900 were allotted fully, application for 400 were allotted 100 debentures and the remaining rejected. All sums, due were received. Journalize the transaction. 

  11. Vikas Ltd. issued 10,000, 12% debentures of Rs. 100 each, payable: Rs. 30 on application and remaining amount on allotment. The public applied for 9,000 debentures which were fully allotted and allotment money duly received. Give Journal entries in the books of Vikas Ltd. 

  12. Tushar Ltd., issued 12% Debentures of Rs. 100 each, at a discount of 5% payable as follows:

    On Application Rs. 40, On Allotment Rs. 55

    Show Journal entries, assuming that all the installments were duly collected.

  13. Ankita Ltd issued 2,000, 10% Debentures of Rs. 100 each, at a premium of Rs. 10 per debentures, payable as follows: On Application-Rs.50, On Allotment - Rs.60 (Premium included Rs. 10)

    The debentures were fully subscribed and all money was duly received.

    Pass Journal entries. 

  14. X Ltd. issued 2,00,000, 12% Debentures of Rs. 10 each at par payable: On applications Rs. 6 and On allotment Rs. 4, redeemable at par after 5 years. Pass Journal entries. 

  15. X Ltd issued 4,00,000, 10% Debentures of Rs. 10 each at discount of 10%, redeemable at par, after 5 years. Amount payable: On Application Rs. 3 and On Allotment Rs. 6 per debenture. Pass Journal entries. 

  16. S.M. Ltd issued 1,00,000, 15% Debentures of Rs. 100 each at 15% premium, redeemable at par, after 6 years. Amount payable: On Application Rs. 40 and on Allotment balance with premium. The issue was fully subscribed. Pass journal entries. 

  17. Sun Ltd. issued 2,00,000, 10% Debentures of Rs.1,000 each, at par, redeemable at Rs.1,100 per debentures after 5 years. Amount payable: On Application Rs. 450, On Allotment Rs. 550. The issue was fully subscribed and paid. Pass Journal entries. 

  18. Suraj Ltd. issued 50,000, 9% Debentures of Rs. 100 each, at a discount of 10% and redeemable at a premium of 15% after 5 years. Amount payable: On Application Rs. 60 and On Allotment Rs. 3 per debentures. Pass Journal Entries. 

  19. Kaushik Ltd. issued 5,000, 12% Debentures of Rs. 10% premium, redeemable at 20% premium, after 5 years. Amount payable: On application Rs. 60 and On Allotment Rs. 50 including premium Rs. 10 per debenture. All money received, issue was fully subscribed. Pass journal entries. 

  20. Gaurang Ltd. issued 5,000, 12% Debentures of Rs. 100 each as under:

    Issued at Rs. 100, redeemable at Rs. 100.

    Issued at Rs. 95, redeemable at Rs. 100.

    Issued at Rs. 105, redeemable at Rs. 100.

    Issued at Rs. 105, redeemable at Rs. 115.

    Pass Journal entries. 

  21. Pass journal entries for following issue of debentures in Suraj Ltd. of Rs. 100 each.

    5,00,000 – 12% Debentures issued at 5% discount and redeemable at par.

    5,00,000 – 12% Debentures issued at 5% premium and redeemable at par.

    5,00,000 - 12% Debentures issued at par redeemable at premium 50%.

    5,00,000 – 12% Debentures issued at discount of 5% and redeemable at premium 10%.

    Pass journal entries. 

  22. Reliance Limited Purchased assets of the book value of Rs. 99,000 from Tata Limited it was agreed that the purchase consideration to be paid by issuing 11 % debentures of Rs. 100 /- each assume debentures have been issued at par, at a discount of 10 % and at a premium of 10 %

    Record Journal entries.

  23. Dinesh Ltd. Issued Rs. 10,00,000/- , 6% debentures on 1st April 2010 Interest is paid on 30th Sept 2010 and 31st March 2011. Record Journal entries Assuming that the income tax deducted is 30% of the amount of the interest.

  24. Aswini Limited issued 10,000, 10% Debentures of Rs. 100 each at par payable in full on application by 1st January. Application was received for 12,000 Debentures. Debentures were allotted on 5th January. Excess application money was refunded on the same date. Pass the necessary Journal Entries in the books of the Company.

  25. Bharani Limited issued 10,000 9% Debentures of Rs. 100 each at a premium of 10% payable Rs. 25 on application, Rs. 35 on allotment (including Premium) and the balance on first and final call. Applications were received for 15,000 Debentures. All allotment was made proportionately, over-subscription being applied to the amount due on allotment. All sums due were received by the Company on due dates. Journalise the above transactions.

  26. Krithika Limited issued 2,000 9% Debentures of Rs. 100 each at a discount of 4% payable Rs. 30 on application and the balance on allotment. Give the necessary Journal entries.

  27. Rohini Ltd. purchased assets of the Book Value of Rs. 99,000 from another Firm. It was agreed that the purchase consideration be paid by issuing 11% Debentures of Rs. 100 each. Pass Journal Entries assuming Debentures have been issued - (a) at par, (b) at discount of 10%, and (c) at a premium of 10%.

  28. Journalise the following issues of Debentures in the books of the Issuing Company (each situation is independent)

    (a) 25,000 nos. of 8% Debentures of Rs. 100 each, issued at a premium of Rs. 15 per Debenture, the total amount is collected at the time of application itself.

    (b) Machinery worth Rs. 38 lakhs was purchased. The amount due to the Vendor was settled by way of issue of 6% Debentures of Rs. 400 each, issued at a discount of 5%.

    (c) 50,000 nos. 9% Fully Convertible Debentures issued at face value of Rs. 50 each, the entire amount being collected at the time of application.

  29. Give Journal Entries in respect of the following independent situations -

    1. 50,000,8% Debenture of Rs. 100 each were issued and redeemable at par any time after 6 years.

    2. 10.000,9% Debentures of Rs. 50 each were issued at a discount of 8%, redeemable at par after 9 years.

    3. Rs. 80,000,9% Debentures were issued at a premium of 5%, redeemable at par.

    4. Rs. 80,000 9% Debentures were issued at par and redeemable at 10% Premium.

    5. 5,000,9% Debentures of Rs. 1000 each issued at a discount of 6%, and redeemable at a premium of 8%.

  30. A Company issues Rs. 20 Lakhs Debentures at a discount of 5%, repayable at the end of five years. What amount of discount will be written off every year?

  31. Vayu Ltd. issued 5,000 5% Debentures of Rs. 100 each, at a discount of 8%. The debentures were redeemable at par, in five equal annual installments, commencing from the date of issue. Show for each year, (a) the amount of interest paid to Debentureholders, and (b) the amount of discount on issue of debentures written off to P & L Account. Assume that the issue was made on 1st July of Year 1 and the Company closes its accounts on 31st December every year. Interest is payable half- yearly on 30th June and 31st December every year.

  32. Indra Company obtained a Cash Credit Limit of Rs. 250 Lakhs from Heavens Bank Ltd. In addition to the primary security of stocks and book debts of the Company, the loan agreement provided for the issue of 1,00,000 7.5% Debentures of a face value of Rs. 300 per bond, as Collateral Security. How will this issue of Debentures be treated in the books of Indra Company?

  33. Aakash Ltd. issued 500, 10% Debentures of Rs. 100 each 6% on 1st January at a discount of 10% redeemable at a premium of 10%. Give Journal Entries, assuming that the interest was payable half-yearly on 30th June and 31st December and tax deducted at source is 10%. The Company follows calendar year as its accounting year.