Issue of Debentures Collage SPCC Term 2

SUNIL PANDA COMMERCE CLASSES (SPCC)
CHAPTERWISE IMPORTANT QUESTIONS COLLAGE

XII ACCOUNTS TERM 02
ISSUE OF DEBENTURES
Q.1) Alka Ltd. issued 5,000, 10% debentures of ` 1,000 each at a discount of 10%
redeemable at a premium of 5% after 5 years. According to the terms of issue ` 500 was
payable on application and the balance amount on allotment of debentures. Record
necessary entries regarding issue of 10% debentures.
Q.2) On 1-04-2016 L and B Ltd issued 635, 9% debentures of ₹500 each. Pass necessary
journal entries for the issue of debentures in the following situations:
a) when debentures were issued at 5% discount, redeemable at 10% premium.
b) When debentures were issued at 12% premium, redeemable at 6% premium
Q.3) Explain with an imaginary example how issue of debentures as collateral security is
shown in the balance sheet of a company when it is recorded in the books of accounts:
A Ltd obtained loan of ₹1,00,000 from Indian bank and issued 1,200, 10% debentures of
₹100 each as collateral security. The company recorded the issue of debentures as collateral
security by opening Debenture suspense account. Present the issue of debentures in the
balance sheet of the company.
Q.4) Vayee Ltd. purchased the following assets of E.X. Ltd. : Land and Building of 60,00,000
at 84,00,000; Plant and Machinery of 40,00,000 at 36,00,000. The purchase consideration
was 1,10,00,000. Payment was made by accepting a Bill of Exchange in favour of E.X. Ltd. of
Rs. 20,00,000 and remaining by issue of 8% debentures of 100 each at a premium of 20%.
Record the necessary journal entries for the above transactions in the books of Vayee Ltd.
Q.5) On 1-4-2015, KK Ltd. Issued 500 9% Debentures of ₹500 each at a discount of 4%,
redeemable at a premium of 5% after three years. Pass the necessary journal entries for the
issue of debenture and debenture interest for the year ended 31-3-2016 assuming that
interest is payable on 30th September and 31st march. The company closes its books on 31st
march every year.
Q,6) On 1st nov,2020, Tata Ltd. Issued 20,000, 10% debentures of ₹100 each at a discount of
5% redeemable at par after four years. The debentures were fully subscribed. It has a
balance of ₹40,000 in capital reserve and ₹75,000 in securities premium reserve which the
company decided to use for writing off the discount on issue of debentures. Pass the journal
entries for issue of debentures and writing off the discount also. Prepare discount on issue
of Debentures Account.
Q.7) Himadri Construction Limited engaged in the business of construction with registered
office in Bangalore, Karnataka was incorporated on 1st April,2016. The company is doing well
and wants to penetrate their roots in other cities with such objectives Himadri Construction
Limited Purchased the running business of Godavari Construction Limited having business in
Coimbatore, Mysore and Salem for a sum of ₹90,00,000. The assets and liabilities of
Godavari construction Limited consisted of the following:
Land ₹42,00,000
Building ₹36,00,000
Inventories ₹12,00,000
Sundry debtors ₹18,00,000
Sundry creditors ₹12,00,000
Himadri Construction Limited paid ₹18,00,000 in cash and for the amount issued 10%
Debentures of ₹100 each at par, redeemable after 6 years at par for the sum due to
Godavari Construction Limited.
You are required to answer the following questions:
a) Calculate the amount to be transferred to Capital Reserve Account.
b) Pass journal entry to be passed at the time of purchase of business of Godavari
Construction Limited.
c) Pass journal entry for payment made in cash to Godavari Construction Limited.
d) Calculate the number of debentures issued to Godavari construction Limited.
e) Pass journal entry for the allotment of debentures to Godavari Construction Limited.
Q.8) Malvika Limited purchased furniture worth ₹6,60,000 from Sunaina Limited and paid to
Suniana Limited as follows:
i) 50% of the amount by accepting a bill of exchange payable after one month.
ii) Balance by issuing 8% debentures of ₹100 each at a premium of 10%.
Pass necessary journal entries in the books of Malvika Limited for the purchase of furniture
and making payment to Sunaina Limited
Q.9) Suhana Limited purchased machinery from Vikrant manufactures limited. The company
paid the vendors by issue of some equity shares and debentures and the balance through
bill payable on acceptance in their favour payable after three months. The accountant of the
company which journalizing the above mentioned transaction left some items blank. You
are required to fill in the blanks
Date Particular L.F. Amount ₹ Amount ₹
Machinery A/c Dr.

To ________________
(Being machinery purchased for ₹14,00,000 from
Vikrant manufactures limited)
Vikrant manufactures limited Dr.
Loss on issue of debentures A/c Dr.
To ______________________
To ______________________
To securities premium reserve A/c
To premium on redemption of debentures A/c
(Bing ₹2,00,000, 12% Debentures issued at a discount of
10%, redeemable at a premium of 10% and 1,00,000
equity shares of ₹10 each issued at a premium of 15%)
______________________ Dr.
To ____________________________
(Being )
Q.10) Goel iron casts industries engaged in production of iron rods having registered office
in chandigarh was incorporated on 1st April,2016. To expand their business, company
purchase plant from faujdar metal limited to increase the production of iron rods. Goel iron
casts industries paid the amount to faujdar metal limited as follows:
i) By issuing 16,000, 12% debentures of ₹100 each at a discount of 10%.
ii) By issuing 80,000, equity shares of ₹100 each at a premium of 10%.
iii) Balance by accepting a bill of exchange of ₹4,00,000 payable after two months.
You are required to answer the following questions:
a) Calculate the amount Goel iron casts industries paid to Faujdar metal limited by
issuing 12% debentures.
b) Calculate the purchase price of plant.
c) Calculate the amount of annual fixed obligation associated with debentures.
d) Pass journal entry which will be passed at the time of purchase of plant in the books
of Goel iron casts industries.
e) Pass journal entries for the allotment of debentures.
Q.11) XYZ Ltd. Issued 5,000 10% Debentures of ₹100 each on 1st April,2015 at a discount of
10%, redeemable at a premium of 10% after four years. Pass the necessary journal entries in
the books of XYZ Ltd. For debentures interest for the year ended 31 st march,2016, assuming
that the interest on debentures was payables half yearly on 30 th September and 31st march.
The rate of tax is 10%.
Q.12) Pacific food limited a FMCG company has an equity share capital of ₹20,00,000. The
company earns a return on investment of 15% on its capital. The company needed funds for
diversification. The finance manager had the following two options:
i)Borrow ₹10,00,000 @15% p.a. from a bank payable in four equal quarterly instalments
starting form the end of the fifith year.
ii)Issue ₹10,00,000, 9% Debentures of ₹100 each to the public at par, redeemable after
five years at a premium of 10%.
After all deliberations on 1st april,2021 the board of directors of the company opted for
option (ii) to increase the return to the shareholders. The balance sheet of the company
on 1st April,2021 shows a balance of ₹3,00,000 in capital reserve which the company
decided to use for writing off the discount on issue of debentures.
You are required to answer the following questions.
a) Pass journal entry for receipt of application money of debentures
b) Pass journal entry to be passed at the time of allotment of debentures
c) Pass journal entry to write off loss on issue of debentures
d) Prepare loss on issue of debenture account
e) Calculate the amount of annual fixed obligation associated with debentures.
Q.13) Saviour limited took a loan of ₹45,00,000 from Panjab National Bank against the
security of tangible assets. In addition to principal security it issued 35,000 12% Debentures
of ₹100 each as collateral security. Pass necessary journal entries for the above transactions,
if the company decided to record the issue of 12% Debentures as collateral security and
show the presentation in the balance sheet of saviour limited.

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SUNIL PANDA COMMERCE CLASSES (SPCC)

CHAPTERWISE IMPORTANT QUESTIONS COLLAGE

Date Particular L.F. Amount ₹ Amount ₹

Machinery A/c Dr.

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