Accounting for Debentures

(b)On 1st April, 2024, XY Ltd. took over assets of ₹ 4,50,000 and liabilities of ₹ 60,000 of Himalyan Ltd. for the purchase consideration of ₹ 4,40,000. It paid the purchase consideration by issuing 8% Debenture of ₹ 100 each at l0% premium. On same date it issued another 3,000, 8% Debenture of ₹ 100 at discount of 10%, redeemable at premium of 5% after 5 years. According to the terms of the issue ₹ 30 is payable on application and the balance on the allotment of debentures. You are required to pass journal entries for the financial year 2024-25 in the books of XY Ltd. to record the above transactions.

(c)PQR Ltd. has issued 10000, 12% convertible debentures ₹ 100 each redeemable after a period of five years at a premium of 5%. The debenture holders also had the option at the time of redemption to convert 30% of their holdings into equity shares of ₹ 10 each at a price of ₹ 20 per share and balance in cash. Debenture holders amounting ₹ 2,00,000 opted to get their debentures converted into equity shares as per terms of the issue. You are required to calculate the number of shares issued and cash paid for redemption of remaining debentures.

(b)ABC & Co. issued 5,000 debentures of INR 1,000/- each at a premium of 10%, payable INR 200 on application, INR 500 on allotment (including premium) and the balance on first and final call. Applications were received for 7,000 debentures. Applications for 4,500 debentures were accepted in full, applicants for 1,000 debentures were allotted 500 debentures and remaining applications were rejected. All money were duly received.

Pass all the journal entries.

(b)Divya Ltd. purchased machinery worth ₹ 1,20,000 and building worth ₹ 2,00,000 from Tara Ltd. for consideration other than cash at an agreed purchase consideration of ₹ 3,00,000 to be satisfied by the issue of 3,000, 12% debentures of ₹ 100 each.

Show the necessary journal entries in the books of Divya Ltd.

(c)Shiv Shakti Ltd. issued 20,000, 13%, Convertible Debentures of ₹ 100 each on 1st April, 2024. The debentures are due for redemption on 1st July, 2024. The terms of issue of debentures provided that they were redeemable at a premium of 5% and also conferred an option to the debentureholders to convert 20% of their holding into equity shares having a nominal value of ₹ 10 per share at a price of ₹ 15 per share. Debentureholders holding 2,500 debentures did not exercise the option.

Calculate the number of equity shares to be allotted to the Debentureholders exercising the option to the maximum.

1st April, 2021, XYZ Ltd. issued 5,000; 8% Debentures of ₹ 100 each at ₹ 96 and redeemable at par after 5 years. The company offered option to the Debenture- holders to convert their holdings into equity shares of ₹ 10 each issued at a premium of ₹ 10 after 31st March, 2024, On 1st April, 2024. 20% holders exercised their option.

Calculate, the amount credited to Discount on issue of Debenture as on 1.4.2024.

(A)₹ 1,600

(B)₹ 3,200

(C)₹ 800

(D)₹ 2,400

Calculate, the amount credited to Security Premium Account as on 1.4.2024 on the basis of information provided in Question No. 22.

(A)₹ 50,000

(B)₹ 48,000

(C)No amount will be credited to security premium a/c

(D)None of the above

A company issue of 12%, 100000 debentures of ₹ 100 each at 10% discount and redeemable at a premium of 5%. Calculate the amount of loss on issue of debenture.

(A)₹ 5,00,000

(B)₹ 10,00,000

(C)₹ 12,00,000

(D)₹ 15,00,000

Calculate the amount of discount to be written off in eighth (VIII) year on the debenture of ₹ 80,00,000 issued at a discount of 10% repayable in annual drawing of ₹ 10,00,000 each year.

(A)₹ 22,222.22

(B)₹ 44,444.44

(C)₹ 66,666.66

(D)₹ 88,888.88

ABC Ltd., issued ₹ 20,00,000 10% debenture at a discount of 5%; the debenture- holders have an option of converting the amount into ₹ 10 equity shares at a premium of 20%. A debenture-holder holding ₹ 60,000 debenture wishes to exercise the option. How many equity shares he will get ?

(A)6000 shares

(B)5000 shares

(C)4750 shares

(D)5700 shares

When a company issues debenture at par or at a discount which are redeemable at a premium, the premium payable on redemption of the debenture is treated as ..................

(A)Capital Loss

(B)Capital Profit

(C)Revenue Loss

(D)Operating Loss

ABC Ltd. keeps a perpetual fixed amount of debenture with coupon rate of 16% in its books. Debenture sells at par (face value ₹ 100) in the market and company pays 25% tax. What is the cost of debenture, if sold at 10% premium in the market ?

(A)16%

(B)14.4%

(C)12%

(D)10.91%

(b)Micro Swift Ltd. issued 20,000 8% debentures of ₹ 100 each as per follows :

(1)Series A of ₹ 5,00,000 (Nominal) for cash at a premium of 20%

(2)Series B of ₹ 5,00,000 (Nominal) for cash at 90%

(3)Series C of ₹ 5,00,000 (Nominal) to Bharat Bank against a loan of ₹ 4,00,000 as collateral security.

(4)Series D of ₹ 5,00,000 to creditor for ₹ 4,50,000 on account of capital expenditure in satisfaction of his claim

Pass Journal Entries. (Ignore writing off discount on issue of debentures)

( b )Rama Ltd. issued 5,000, 8% debentures of 1,000/- each at a discount of 5% on April 1, 2020. The debentures are repayable by equal annual drawings in four years.

You are required to show the amount of discount to be written off every year.

In case of the issue of debentures as collateral securities the holder is entitled to :

(A)Interest on loans as well as interest on debentures received as collateral securities

(B)Interest on loans only, but not on debentures received as collateral securities

(C)No interest on loans, but interest only on debentures received as collateral securities

(D)Neither interest on loans nor interest on debentures received as collateral securities

As per SEBI (Issue and Listing of Debt Securities), Regulations 2008 for manufacturing companies, infrastructure companies, and privately placed debentures by listed companies or unlisted companies the adequacy of debenture redemption reserve will be :

(A)100% of the value of outstanding debentures

(B)75% of the value of outstanding debentures

(C)50% of the value of outstanding debentures

(D)25% of the value of outstanding debentures

In case of the purchase of debentures in the open market for immediate cancellation, if there is any difference between the nominal value of the debentures cancelled and the price paid for them, the same has to be treated as :

(A)Profit or Loss on cancellation

(B)Capital Reserve

(C)Revenue Reserve

(D)Capital Loss

Sagar Ltd. purchased a machinery worth ₹ 1,20,000 and building worth ₹ 2,00,000 from Radha Ltd. for an agreed purchase consideration of ₹ 3,00,000 to be satisfied by the issue of 3,000, 10% debentures of ₹ 100 each. Calculate the amount to be transferred to Capital Reserve A/c.

(A)₹ 10,000

(B)₹ 20,000

(C)₹ 30,000

(D)₹ 40,000

EBIT of ABC Ltd. is ₹ 7,00,000. The company has 12% ₹ 25,00,000 debentures.

The equity capitalization rate is 16%. Calculate the market value of the firm ( ₹ ) as per the Net Income (NI) approach. Ignore taxation.

(A)50,00,000

(B)58,75,000

(C)47,95,000

(D)57,85,000

. ............... and .......... are two financial instruments that carry a fixed rate of interest and they have to be paid off regardless of whether the firm earns revenue or not.

(A)Equity Shares, Preference Shares

(B)Preferred Stocks, Debentures

(C)Bonds, Debentures

(D)Preferred Stocks, Bonds

A company purchased 1000, 12% debentures of ₹ 100 each @ ₹ 97 (cuminterest) on 1st May, 2023. The company has the practice to close its books of accounts on 31st December every year. Interest on debentures is payable halfyearly on 30th June and 31st December. In this purchase, the amount to be debited to Debenture Redemption Account is :

(A)₹ 93,000

(B)₹ 97,000

(C)₹ 1,00,000

(D)₹ 1,10,000

If debentures are issued by a company at a discount, it is prudent to write-off the discount :

(A)In the year itself

(B)In five equal annual installments

(C)During the life time of the debentures

(D)During the period allowed by the trustees of debenture-holders

Ranu & Co. has issued 10% debenture of face value 100 for ₹ 10 lakh. The debenture is expected to be sold at 5% discount. It will also involve floatation costs of ₹ 10 per debenture. The debentures are redeemable at a premium of 10% after 10 years. Calculate the cost of debenture if the tax rate is 30%.

(A)8.97%

(B)9.56%

(C)8.25%

(D)10.12%

Which debentures are paid on the basis of priority as compared to other debentures?

(A)Redeemable

(B)Registered

(C)First Mortgage

(D)Naked

PQR Ltd. had issued ₹ 1, 00,000, 8% debentures on which interest was payable half -yearly on 30th September and 31st March. Tax deducted at source is 10%. The necessary journal entries relating to debenture interest on 30th September assuming that all money was duly paid by the company.

(A)Debenture Interest A/c DR ₹ 4,000 and CR Debenture Holder’s A/c ₹ 4,000

(B)Debenture Interest A/c DR ₹ 4,000 and CR Debenture Holder’s A/c ₹ 3,600 and Income Tax Payable A/c ₹ 400

(C)Debenture Interest A/c DR ₹ 8,000 and CR Debenture Holder’s A/c ₹ 8,000

(D)Debenture Interest A/c DR ₹ 8,000 and CR Debenture Holder’s A/c ₹ 7,200 and Income Tax Payable A/c ₹ 800

When debentures are issued at a discount and are redeemable at a premium, which of the following accounts is debited at the time of issue?

(A)Debentures A/c

(B)Premium on redemption of debentures A/c

(C)Loss on the issue of debentures A/c

(D)Profit and Loss A/c

ABC Ltd. purchase a building for ₹ 25, 00,000 payables as 20% as cash and b alance by allotment of 10% debentures of ₹ 100 each at a premium of 25%. Calculate the number of debentures to be issued:

(A)25,000

(B)20,000

(C)17,500

(D)16,000

A company raised ₹ 4,90,000 by issuing 5,000 10% debentures of ₹ 100 each with 8 -year maturity at 2% discount. It also paid commission of 3% of the face value to brokers. If the company falls in 30% tax bracket, the approx. effective cost of the debt is :

(A)10.90%

(B)7.37%

(C)7.63%

(D)7.25%

Appointment of Debenture Trustee is a precondition to give invitation for subscribing of debentures to public when the invitation is given to :

(A)Any no. of persons

(B)More than 500 persons

(C)More than 1,000 persons

(D)More than 2,000 persons

The amount remaining invested or deposited in the specified securities shall not, at any time, fall below ................ of the amount of debentures maturing during the year ending on 31st March of every year.

(A)10%

(B)15%

(C)20%

(D)25%

A company can issue debentures :

(A)With voting rights at par with shareholders

(B)With limited voting rights for specified items only

(C)Without any voting rights only

(D)With voting rights to Debenture Trustees only

Which of the following is false in respect to Non-convertible debentures ?

(A)These are debt instruments carrying a fix rate of interest

(B)These instruments have a maturity period of 5-9 years

(C)There is a dilution of ownership when a company issue these securities

(D)If interest is accumulated on them, it is to be paid by company by liquidation of its assets

A company issued 1000 10% debentures of ₹ 100 each at par and spent 3% on account of floatation cost and commission to brokers. These debentures are redeemable at 5% premium at the end of 5 years. If the company falls in 30% tax bracket, the effective cost of debentures is :

(A)10%

(B)7.35%

(C)8.04%

(D)10.5%

When debentures are issued as collateral security, the account to be debited to record in the books of account is .................... .

(A)Debenture Account

(B)Debenture Reserve Account

(C)Debenture Suspense Account

(D)Provision for Debenture Account

When there is profit on cancellation of debentures, the amount of profit is transferred to .................... .

(A)General Reserve Account

(B)Capital Reserve Account

(C)Securities Premium Account

(D)Profit and Loss Account

A company cannot issue a prospectus or make an offer or invitation to .............. for subscribing to debentures unless the company has before issuing such a prospectus, appointed one or more debenture trustees.

(A)more than 100 persons

(B)more than 200 persons

(C)more than 300 persons

(D)more than 500 persons

X Ltd. purchased a building worth ₹ 4,50,000 and furniture worth ₹ 2,50,000 from Z Ltd. for an agreed purchase consideration of ₹ 6,60,000 to be satisfied by issue of 8% debentures of ₹ 100 each at a premium of 10%. What is the amount to be transferred to capital reserve account ?

(A)₹ 20,000

(B)₹ 40,000

(C)₹ 60,000

(D)₹ 66,000

ABC Ltd. issued 10%, 10,000 debentures of ₹ 100 each at a discount of 8% and which are redeemable at a premium of 5%. What is the amount of loss on issue of debentures ?

(A)₹ 80,000

(B)₹ 30,000

(C)₹ 50,000

(D)₹ 1,30,000

In 2016, A Ltd. issued 12% ₹ 50,00,000 debentures at a discount of 8%; the debentures were redeemable in 2020. In 2020, the company gave the debentureholders the option of converting the debentures into equity shares at a premium of 25%. One debentureholder, holding ₹ 2,00,000 debentures want to exercise the option. What is the face value of the shares that he will get ?

(A)₹ 2,50,000

(B)₹ 1,60,000

(C)₹ 2,25,000

(D)₹ 1,75,000

A Ltd. issued debentures worth ₹ 100 Lakh with coupon rate of 10% and realized ₹ 97.5 Lakh. The company falls in 30% tax bracket. These debentures are repayable at par after 5 years. The effective cost of debentures will be:

(A)8.55%

(B)8.44%

(C)7.55%

(D)7.44%

XYZ Ltd. issued 60,000, 12% debentures of ₹ 100 each. 70% of the issue was underwritten by ABC Ltd. Applications for 56,000 debentures were received by the XYZ Ltd. The liability of ABC Ltd. is :

(A)2,800 debentures

(B)3,800 debentures

(C)4,000 debentures

(D)4,200 debentures

P Ltd. issued 12%, 10,000 debentures of ₹ 100 each at a discount of 10% on 1st April 2016. The company pays interest half yearly on 30th June and 31st December every year. On 31st March 2020 the amount shown as ‘Interest accrued but not due’ in the balance sheet will be :

(A)₹ 30,000

(B)₹ 60,000

(C)₹ 1,20,000

(D)₹ 1,50,000

Debenture can be issued :

(i)For Cash

(ii)For Consideration other than Cash

(iii)As Collateral Security

(A)(i)

(B)(i), (ii)

(C)(i), (iii)

(D)(i), (ii) and (iii)

P Ltd. issues 10,000, 7% debentures of ₹ 100 each at a discount of 5% redeemable at the end of 7 years at a premium of 6%. Loss on issue of debenture account will be debited by :

(A)₹ 50,000

(B)₹ 60,000

(C)₹ 90,000

(D)₹ 1,10,000

As per guidelines issued by SEBI, what percentage of the amount of debentures must be transferred to “Debenture Redemption Reserve” before the commencement of redemption of debenture, in case of convertible debenturres:

(A)0%

(B)25%

(C)50%

(D)100%

When debenture is issued as collateral security, the final entry for recovering the collateral debenture in books is :

(A)Dr. Cash a/c, Cr. Debenture a/c

(B)Dr. Debenture Suspense a/c, Cr. Cash a/c

(C)Dr. Debenture Suspense a/c, Cr. Debenture a/c

(D)Dr. Cash a/c, Cr. Debenture Suspense a/c

Wind Ltd. issued 30,000 12% debentures of ₹ 10 each at par which are redeemable after 5 years at a premium of 10%. The amount of loss on redemption to be written off every year will be :

(A)₹ 15,000

(B)₹ 7,500

(C)₹ 6,000

(D)₹ 4,500

If the purchase price for the debentures includes interest for the expired period, the quotation is said to be.................. .

(A)Ex-interest

(B)Cum-interest

(C)Net-interest

(D)Gross-interest

Which of the following is false :

(A)Rate of interest on debenture is fixed

(B)Equity shareholders are owners and debentureholders are lenders

(C)At the time of liquidation debentureholders get their payment before equity shareholders

(D)Interest on debentures is an appropriation of profit

Which of the following is true with regard to, 12% debentures issued at a discount at 10%?

(A)The carrying amount of debentures will reduce each year at a rate of 10%

(B)Issue price and carrying amount of debentures are equal

(C)The face value and carrying amount of debentures are equal

(D)At the time of redemption, the debenture holder will be paid the issue price

‘‘Interest accrued & due on debentures’’ is shown ...................... .

(A)Under debentures

(B)As other current liabilities

(C)As provisions

(D)As a reduction of bank balance

Discount on issue of debentures is a :

(A)Revenue loss to be charged in the year of issue

(B)Capital loss to be written off from capital reserve

(C)Capital loss to be written off over the tenure of the debentures

(D)Capital loss to be shown as goodwill

Tax deducted at source on interest on debenture is shown as ......................

(A)Expense

(B)Asset

(C)Liability

(D)Income

T Ltd. purchased machinery from N Company for a book value of ₹ 4,00,000. The consideration was paid by issue of 10% debentures of ₹ 100 each at a premium of 25%. The debenture account was credited with .............................

(A)₹ 4,00,000

(B)₹ 5,00,000

(C)₹ 3,20,000

(D)₹ 4,80,000

K Ltd. issued 5,000, 12% debentures of ₹ 100 each at a premium of 10%, which are redeemable after 10 years at a premium of 20%. The amount of loss on redemption of debentures to be written off every year is ......................

(A)₹ 80,000

(B)₹ 40,000

(C)₹ 10,000

(D)₹ 8,000

Which of the following statements is correct ?

(A)Preference shares and debentures have priority right for a reward over ordinary shares

(B)Debentures will not receive interest in a year when the company makes an operating loss

(C)Preference shares will get dividend only when ordinary shares too receive them

(D)Ordinary shares could be paid dividend even when a company has negative retained earnings

Every company required to create/maintain Debenture Redumption Reserve shall before the 30th day of April of each year, deposit or invest (as the case may be) at least ............ % of the amount of its debentures maturing during the year ending on the 31st day of March next year in the prescribed mode.

(A)5

(B)10

(C)15

(D)25

Neel Ltd. purchased a building worth ₹ 99,00,000 and issued 12% Debentures of ₹ 100 each at a premium of 10%. What will be the amount of premium ?

(A)₹ 8,00,000

(B)₹ 9,90,000

(C)₹ 9,00,000

(D)₹ 10,00,000

Saket Ltd. purchased a machinery worth ₹ 1,20,000 and building worth ₹ 2,00,000 from Rashmi Ltd. for an agreed purchase consideration of ₹ 3,00,000 to be satisfied by the issue of 3,000, 10% debentures of ₹ 100 each. Calculate the amount to be transferred to capital reserve A/c:

(A)₹ 10,000

(B)₹ 20,000

(C)₹ 30,000

(D)₹ 40,000

Five years ago X Ltd. had issued 12% Debentures of ? 30 lakh (redeemable in six equal annual Installments). These Debentures will be shown in the Balance Sheet of a company under the heading :

(A)Non-current Assets

(B)Non-current Liabilities

(C)Current Assets

(D)Current Liabilities

PQR Ltd. keeps a perpetual fixed amount of debenture with coupon rate of 16% in its books. Debenture sells at par (face value ₹ 100) in the market and company pays 40% tax. What is the cost of debenture, if sold at 10% premium in the market ?

(A)8.82%

(B)8.72%

(C)8.27%

(D)9.10%

The entry—‘‘Debentures Suspense A/c Dr., To Debentures A/c’’ can be passed/ done :

(A)On the issue of debentures for the consideration other than cash.

(B)On the issue of debentures as collateral security.

(C)For rectification of the error relating to balance of debentures account.

(D)On the issue of debentures at discount but redeemable at premium.

C Limited issued 8% Debentures of ₹ 65,00,000 at 5% discount which are redeemable at a premium of 10%. On recording the transaction ‘‘Loss on Issue of Debentures Account’’ will be :

(A)Debited by ₹ 3,25,000

(B)Debited by ₹ 6,50,000

(C)Debited by ₹ 9,75,000

(D)Credited by ₹ 3,25,000

M Ltd. issued 8% Debentures of ₹ 60 Lakh on 1st January, 2019 at a discount of 10%. The debentures are redeemable in three equal instalments of ₹ 20 Lakh each payable on 31st December every year. The amount of discount to be written at the end of the year on 31st March, 2021,will be :

(A)₹ 2,00,000

(B)₹ 1,00,000

(C)₹ 1,50,000

(D)₹ 1,75,000

S Ltd. had issued 80,000, 8% Debentures of ₹ 100 each redeemable on 31st December, 2019 at a premium of 20%. The company offered three options to debentureholders, out of which one is to convert their holdings into equity shares of ₹ 10 each at a premium of ₹ 3.50 per share. This offer was accepted by the holders of 49,275 debentures. For this, number of equity shares issued will be :

(A)4,38,000

(B)5,91,300

(C)3,65,000

(D)7,98,255

G Ltd. has 8,00,000, 12% Debentures of ₹ 100 each. During the year 2018-2019 the company purchased its own debentures from the open market for immediate cancellation are as follows :

(i)Aug. 1, 2018 : 15000 Debentures @ ₹ 95.50 (ex-interest)

(ii)Jan. 1, 2019 : 25000 Debentures @ ₹ 101.50 (cum-interest)

If debenture interest is payable on 30th September and 31st March every year, then the amount of profit or loss on cancellation of debentures will be :

(A)₹ 30,000 (Profit)

(B)₹ 70,000 (Profit)

(C)₹ 67,500 (Profit)

(D)₹ 1,05,000 (Profit)

The profit on cancellation of debentures should be transferred to :

(A)Securities Premium A/c

(B)Statement of profit and Loss

(C)General Reserve A/c

(D)Capital Reserve A/c

During the year 2018-19, a company redeemed its 10% debenture of ₹ 8,00,000 at 10% premium and after some time a fresh issue was made of new 10% debenture of ₹ 7,50,000 at a premium of 25%. The net cash flow from debenture would be :

(A)Net cash outflow of ₹ 50,000

(B)Net cash inflow of ₹ 50,000

(C)Net cash inflow of ₹ 57,500

(D)Net cash outflow ₹ 57,500

(b)Aarvi Ltd. has availed a loan of ₹ 150 lakh from Bank of India and issued to the Bank of India as collateral security - 2,50,000 debentures bearing interest rate of 9%, and of the face value of ₹ 100 each.

From the above information, you are required to :

(1)Pass the necessary journal entries in the books of Aarvi Ltd.; and

(2)Show the presentation of the position in the Aarvi Ltd.'s Balance Sheet, as

per Schedule III of the Companies Act, 2013.

(i)The following balances were shown in the Balance Sheet of Geeta Ltd. as at 31 st March, 2019 :

Additional Information :

(1)The company passed a resolution in the Board of directors' meeting, to buyback 20% of it's equity share capital at ₹ 45 per share. For this purpose, it sold it's investments of ₹ 2,200 lakh for ₹ 2,500 lakh.

(2)Included in it's investments were "Investments in own debentures" costing ₹ 150 lakh (face value ₹ 180 lakh). These debentures were cancelled as per Board of directors' meeting's resolution.

You are required to pass necessary journal entries in the books of Geeta Ltd.

(a)Pass necessary journal entries in the books of Karan Ltd. in each of the following cases :

(i)3,000, 8% Debentures of ₹ 100 each have been issued at par and are redeemable at par.

(ii)6,000, 8% Debentures of ₹ 100 each are issued at par and are redeemable at 5% premium.

(iii)5,000, 8% Debentures of ₹ 100 each have been issued at 5% discount and are redeemable at par.

(iv)2,000, 8% Debentures of ₹ 100 each are issued at 5% discount and are redeemable at 4% premium.

(v)4,000, 8% Debentures of ₹ 100 each are issued at 5% premium and are redeemable at par.

Premium on redemption of debentures is :

(A)Suspense A/c

(B)Real A/c

(C)Personal A/c

(D)Nominal A/c

(b)An unlisted company – other than AIFI, Bank, NBFC and HFC – has debentures on its balance sheet as on 31st March, 2022. Balances are as follows :

The interest on debentures is paid until 31st March, 2022.

The debentures were repaid on 30th June, 2022 at 10% premium. The investments were realized at par.

Prepare the following ledgers :

l Debenture Account, Debenture Interest Account and Debentures Redemption Reserve Investment Account.

l Debenture Redemption Reserve Account.

l Extract of bank account relating to above transactions.

If the sinking fund created for redemption of debentures is non-cumulative, then the interest received from Sinking Fund Investment is :

(A)Credited to Debenture-holder Account

(B)Credited to Sinking Fund Account

(C)Credited to Profit and Loss Account

(D)Credit to General Reserve Account

(b)(i) The following balances appeared in the books of a Company as on 1st April, 2022 : Sinking Fund for Redemption of Debentures ₹ 5,50,000;

Sinking Fund Investments ₹ 3,44,325;

7% Debentures ₹ 10,00,000.

In order to redeem these debentures, the company sold the Sinking Fund Investments and realized ₹ 3,45,000.

You are required to pass journal entry for the accounting treatment of profit/ loss on sale of Sinking Fund Investment.

(ii)Out of ₹ 10,00,000 6% Debentures outstanding on 1st April, 2022, ₹ 5,00,000. Debentures were redeemed on 31st October, 2022. The balance of Debenture Sinking Fund Account on 1st April, 2022 was ₹ 10,00,000. Interest on debenture is paid on 31st March, 2022.

How will you deal with the balance of Debenture Sinking Fund Account at the time of its redemption ? You are required to pass necessary journal entry in this regard. What will be the amount of interest paid on these debentures at the time of redemption ?

If the sinking fund is non-cumulative, the interest received on Sinking Fund Investment......................

(A)Credited to Sinking Fund A/c

(B)Credited to the Profit & Loss A/c

(C)Credited to General Reserve

(D)Credited to Sinking Fund Investment A/c

The amount credited to the Debenture Redemption Reserve shall be utilized by the company for the purpose of................. .

(A)Purchase of own debentures

(B)Redemptions of shares

(C)Purchase of assets for the business

(D)Redemption of debentures

SS Ltd. purchased ₹ 15,000, 8% own debentures of ₹ 1,000 each on 30th September at ₹ 960 cum-interest. If interest is payable on 30th June and 31st December, the amount debited to Own Debentures Account at the time of purchase would be :

(A)₹ 14,100

(B)₹ 14,400

(C)₹ 14,700

(D)₹ 15,000

If the sinking fund is non-cumulative, the interest received on Sinking Fund Investment is not invested and not credited to Sinking Fund A/c. The amount of interest is :

(A)debited to Profit & Loss statement

(B)credited to Profit & Loss statement

(C)added in reserve in balance sheet

(D)added in assets in balance sheet

Which of the following is not a method of redemption of debentures ?

(A)By payment in lumpsum

(B)By payment is Instalments

(C)By purchase in open market

(D)By conversion into short term loans

(d)Elaborate the guidelines provided by SEBI with respect to creation of Debenture Redemption Reserve.