Accounts

Class 12th
Chapter: 8
Issue of Debentures and Redemption of Debenture
Issue of Debentures of Cash and Consideration Other than Cash

Question 1

What is debenture?

Question 2

What does debenture include?

Question 3

Name the head and sub head under which "DEBENTURES" appear in the Balance Sheet of a
company.

Question 4

Ankita Ltd issued 1000, 9% debentures of Rs 50 each payable as follows: 20 on application, 20

on allotment Balance in final call.

Applications were received for all debentures and allotment was made. The call money was
also received on due date. Pass necessary journal entries in the books of Ankita Ltd.

Question 5

Bharti Ltd issued 2000, 9% debentures of Rs 100 each payable on the following terms: 30 on
application, 30 on allotment, 20 on first call. Balance in final call.

Applications were received for all debentures and allotment was made. The call money was
also received on due date except for 300 debentures. Pass necessary journal entries in the
books of Bharti Ltd.

Question 6:

Chawla Ltd issued 1000, 9% debentures of Rs 50 each payable as follows: 15 on application,

10 on allotment, 10 on first call. Balance in final call.
Applications were received for all debentures and allotment was made. The call money was
also received on due date except for 300 debentures. Pass necessary journal entries in the
books of Chawla Ltd.

Question 7:

Param ltd issued 2,000 debentures of Rs 100 each on the following terms: 20 on application,
20 on allotment, 30 on first call, 30 on final call. The public applied for 2400 debentures.
Applications for 400 debentures were rejected and rests of the applicants were given full
allotment. All installments were received on time. Pass necessary journal entries in the books
of Param Ltd.

Question 8:

Quora ltd issued 2,000 debentures of Rs 100 each on the following terms: 20 on application,
20 on allotment, 30 on first call, 30 on final call.

The public applied for 2400 debentures. Applications for 600 debentures were rejected and
rests of the applicants were given proportionate allotment. All installments were received on
time.

Pass necessary journal entries in the books of Quora Ltd.

Question 9:

Rajat ltd issued 1,000 debentures of Rs 100 each on the following terms: 20 on application,
20 on allotment, 30 on first call, 30 on final call.

The public applied for 1400 debentures. 800 applications were accepted in full. Applicants for
400 debentures were allotted 200 debentures and applications for 200 debentures were
rejected. All installments were received on time. Pass necessary journal entries in the books
of Rajat Ltd.

Question 10:

X Ltd issued 500, 6% debentures of Rs 50 each at a premium of 10% payable as follows: 20 on

application, 20 on allotment (including premium) Balance in final call.

Applications were received for all debentures and allotment was made. The call money was
also received on due date. Pass necessary journal entries in the books of X Ltd.

Question 11:

Y ltd issued 20,000 debentures of Rs 10 each at a premium of Rs 2 on the following terms: 2

on application, 2 on allotment, 3 on first call, 3 on final call.
The public applied for 24,000 debentures. Applications for 4,000 debentures were rejected
and rests of the applicants were given full allotment. All installments were received on time.

Pass necessary journal entries in the books of Y Ltd.

Question 12:

Z ltd issued 2,000 debentures of Rs 100 at a premium of 20% each on the following terms: 20
on application, 20 on allotment, 30 on first call, 30 on final call the public applied for 2400
debentures. Applications for 600 debentures were rejected and rests of the applicants were
given proportionate allotment. All installments were received on time.

Pass necessary journal entries in the books of Z Ltd.

Question 13:

Nav Lakshmi Ltd invited applications for issuing 3000, 12% debentures of Rs 100 each at a
premium of Rs 50 per debenture. Full amount was payable on application. Applications were
received for 4000 debentures. Applications for 1,000 debentures were rejected and
application money was refunded. Debentures were allotted to remaining applicants. Pass
necessary journal entries for the above transaction􀀊 in the books of Nav Lakshmi ltd.

Question 14:

A limited company bought a Building for Rs 99,00,000. The consideration was paid by issuing
6% debentures of the face value of Rs 100. Pass journal entries when

i) Debentures are issued at par

ii) Debentures are issued at 10% premium
Debentures are issued at 10% discount.

Question 15:

Kavya Ltd purchased Building of Rs44,00,000 from furniture mart. 50% of the amount was
paid by accepting a bill for exchange and for the balance company issued 9% debentures of
100 each at a premium of 10%. Pass necessary journal entries.

Question 16:

Rose ltd took over assets of Rs 1, 50,000 and took over creditors of Rs 51,000. In
consideration, rose Ltd issued 6% debentures of nominal value of Rs 10. Pass necessary e
entries if:

Debentures were issued at par

Debentures were issued at premium of 10%

Debentures were issued at discount of 10 %

Question 17:

Tulip Ltd purchased assets of X Ltd for Rs 50, 00,000. It also agreed to take over the liabilities
of X Ltd amounted to Rs 20, 00,000 for a purchase consideration of Rs 28,00,000. The
payment was made by issue of 5% debentures of Rs 100 each at par. Pass necessary journal
entries in the books of Tulip Ltd.

Question 18:

Lotus Ltd purchased assets of X Ltd for Rs 3, 00,000. It also agreed to take over the liabilities
of X Ltd amounted to Rs 50,000 for a purchase consideration of Rs 2,80,000. The payment
was made by issue of 5% debentures of Rs 100 each at par. Pass necessary journal entries in
the books of Lotus Ltd.

Issue of Debentures from redemption point of view

Question 1:

Pass journal entries at the time of issue of debentures in the following situations assuming
the face value of each debenture is Rs.100:

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

b. Issued at Rs.95, redeemable at Rs.100
c. Issued at Rs.110, redeemable at Rs.100
d. Issued at Rs.100, redeemable at Rs.110
e. Issued at Rs. 90, redeemable at premium of Rs.105
f. Issued at Rs.105, redeemable at Rs.110.

Question 2:
Excel Ltd. issued 40,000, 9% Debentures of 100 each, payable on application. Pass journal
entries at the time of issue of debentures in the following situations:

(a) Issued at par, redeemable at par

(b) Issued at discount of 10%, redeemable at par
(c) Issued at premium of 10%, redeemable at par
(d) Issued at par, redeemable at 10% premium
(e) Issued at discount of 5%, redeemable at premium of 10%
(f) Issued at a premium of 5%, redeemable at a premium of 10%.

Question 3:

Green Ltd. issued Rs.80,000, 9% Debentures of Rs.10 each at a premium of 5% redeemable at

par. Give Journal entries for the issue of Debentures.

Question 4:

Red Ltd. issued 50,000 8% debentures of Rs.10 each at par and redeemable at 10% premium.
Give Journal entries for the issue of Debentures.

Question 5:

Brown Ltd. issued Rs.2,00,000 8% debentures of Rs.10 each at discount of 10% and
redeemable at 10% premium. Give Journal entries for the issue of Debentures.

Question 6:

A company issued 1,00,000, 9% Debentures at a premium of 5 percent redeemable after 10

years at a premium of 10 percent. Give Journal entries for the issue of Debentures.

Question 7:

X Ltd. issued 2,00,000, 9% Debentures of t 100 each payable as follows: on applications-t 30;
on allotment -t 70. The debentures were fully subscribed and the money due was duly
received. As per the terms of the prospectus, the debentures are redeemable at t 110 per
debenture. Give the necessary entries regarding issue of debentures in the books of
company.

Question 8:

Y Ltd. issued t 50,00,000, 8% Debentures of t 100 each at a discount of 10% redeemable after
five years at a premium of % payable as follows: t 20 with applications; t 30 on allotment and
balance on call.

The issue was oversubscribed by 25,000 debentures and it was decided to reject applications
for 15,000 shares and their applications money was returned. Pro-rata allotment was made
to remaining applicants and excess application money was applied towards sum due on
allotment.

Record the above transactions in the journal and Cash Book regarding issue of debentures.

Question 9:

Surya Ltd. acquired assets of t 3,00,000 and took over Sundry Creditors of t 20,000 of Chanda
Ltd. for the purchase consideration of t 3,30,000. 50% of the payment was made by issuing a
Bill of Exchange and the balance by issuing 7% Debentures of t 100 each at a premium of
10%, redeemable at a premium of 5%, in favor of Chanda Ltd. Pass the necessary Journal
entries for the above transactions in the books of Surya Ltd.

Question 10:

Rustom Ltd. acquired the business of Sultan Ltd. consisting assets of 􀀊31,00,000 and 3,00,000
for the purchase consideration of 􀀊 27,00,000. 25% of the purchase consideration was paid in
cash and balance by issuing 7% Debentures of t 100 each at a discount of 10%, redeemable at
a premium of 5%. Pass necessary Journal entries for the above transactions in the books of
Rustom Ltd.

Redemption of debentures by lump sum.

Question 1:

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

Question 2:

A FCONs India Ltd (an infrastructure company) issued 5,00,000,9% debentures of Rs.20 each
on April,2005 redeemable on 31st march, 2015.lnvestment as required by law is made in
fixed deposit of the bank on 30th April. Record journal entries of the issue and redemption of
debentures.

Question 3:

Anirudh ltd. has 8000 8% debentures of Rs. 100 each due for redemption on March 31st,
2105. There was a balance of 1, 50,000 in Debenture redemption reserve on the date of
redemption. Record necessary entries for the redemption.

Question 4:

Kaveri Ltd. issued 50,000 9% debentures of Rs. 100 each at par on October 31, 2012
redeemable on March 31st 2016. It was decided to invest 15% of the face value of
debentures to be redeemed towards debenture redemption investment on 30th of April
2015. The board of directors transferred the required amount to debenture redemption
reserve on March 31st 2016. Debentures were redeemed on due date. Record necessary
entries for issue and redemption.

Question 5:

Y Ltd. redeemed Rs. 50, 00,000 8% debentures at a premium of 10% out of profits on 31st
march 2015. Pass the necessary journal entries for the redemption of debentures.

Redemption of Debentures by Drawing of Lots

Question 1:

Finkelstei Ltd. Issued 10,000 10% Debentures of Rs.100 each. It was decided to redeem them
in four equal annual instalments starting from 31st March 2015. It was decided to create
Debenture Redemption Reserve and invest the required amount in Debenture Redemption
Investment. Give journal to record the issue and redemption of the first lot of debentures.

Question 2:

Greyson Ltd. Issued 10,000 10%Debentures of Rs.100 each redeemable at a premium of 10%.
It was decided to redeem them at a premium of 10%. It was decided to redeem them in two
equal lots starting from 31st March 2015. The company has a balance of Rs.1,10,000 in
Debenture Redemption Reserve. The company complied with the requirement with respect
to Investment made in Govt Securities on 1st April 2014. Record the necessary journal entries
at the time of redemption of debentures.

Question3:

Escorts Ltd. Issued 35,000 10% Debentures of Rs.100 each on 1st October 2011, redeemable
in five equal annual instalments starting with March 31st 2015. The board decided to transfer
to Debenture Redemption Reserve Rs.50,000 and Rs.4,00,000 on March 31st 2012 and 2013
respectively and balance required to be transferred on March 31st 2014. Investment as
required by law was made in a fixed deposit of the bank. Record necessary journal entries.

Question 4:

Geeta Ltd. Issued 35,000 10% Debentures of Rs.100 each on October 1, 2011, redeemable as
follows.

March 31st 2015 March 31st 2016 March 31st 2017

5,000 Debentures 10,000 Debentures 20,000 Debentures. The board decided to transfer the
required amount to Debenture Redemption Reserve in two equal instalments starting from
March 31st 2013. Investment as was required by law was made in 10% Govt Bonds. Record
necessary journal entries. Ignore entries relating to interest.

Question 5:

Reliance Ltd. Issued 12,000 8% Debentures of Rs.100 each of which one third is due for
redemption on March 31st 2015. The company has its Debenture redemption reserve
balance of Rs.3,80,000. Required investment is in fixed deposit on 30TH April 2014 bearing
interest @6% p.a. Record necessary journal entries for the year ending31st March 2015
including interest entries assuming the Company and Bank deducts 10% as TDS and
deposited in the bank.

Question 6:

Tata power Ltd. Issued 35,000 10% Debentures of Rs.100 each redeemable at a premium of
10%. These were due for redemption in five equal half yearly instalments commencing from
September 30th 2015. Company redeemed the debentures after compliance of requirements
of the Companies Act 2013.

Question 7:

On 31st March 2015, W Ltd. had the following balances in its books.

9% Debentures Rs.6,00,000

Debenture Redemption Reserve Rs.1,00,000

Debenture Redemption Investment Rs.45,000

On that date the company decided to transfer Rs.50,000 to Debenture Redemption Reserve
and redeem Rs.3,00,000 worth of debentures. Pass necessary journal entries in the books of
the company.

Redemption by Purchase of Debentures from open market (as investment)

Important points to be noted:

• It is assumed that the Company has sufficient balance in DRR before initiating the
purchase of debentures for cancellation. Hence, unless otherwise stated, there is no
need to create DRR
• Also assume that the required investment @ 15% has been made. Hence there is no
need to make investment.

Question 1:

Aman Ltd. purchased its own 500 debentures of the face value of '50,000 from the open
market for the (purpose of immediate cancellation at ' 94. Pass necessary journal entries.

Question 2:

(a) Renuka Ltd. purchased its own 300, 9% debentures of' 100 each at' 95 for immediate
cancellation. The expenses (Brokerage) paid at the time of purchase amounted to '
200. Pass necessary journal entries.
(b) Renuka Ltd. purchased its own 300, 9% debentures of' 100 each at' 95 for immediate
cancellation.

Question3:

Pratap Ltd. had issued 12 %, ' 100 debentures amounting to' 1,50,000 which will be
redeemed at the option of company i.e. may be drawings at par or by purchase its
debentures from the open market. It was decided to redeem all the debentures, by
purchasing debentures of' 1,20,000 in the open market@' 97 each and draw' 30,000
debentures. Pass necessary journal entries in the books of company.

Question 4:

Anita Ltd. issued 1,000, 8 % debentures of' 100 each. Out of these debentures of the face
value of ' 25,000 will be redeemed annually starting from 2001 may be by drawing at par or
by purchasing from the open market depending upon the company's option.

During 2001 company purchase ' 20,000 debentures at ' 96 and ' 5,000 debentures at ' 97.
Expenses during this process were amounted to' 300. Pass necessary journal entries for the
same for the year 2001.

Question 5:

On 1'1 April 1998, Ganpati Limited Issued 1,000, 8% debentures of 1;000 each at par.
According to terms of issue, debentures of ' 20,000 will be redeemed every year starting
from the 31" March 2000 either by purchase in the open market or by drawings of lots
depending on the company's option. It was decided to invest the required amount on 301h
April 1999 and to create debenture redemption reserve on 31'' March, 2000.

On 31'1 March 2000 the company purchased debentures of the face value of ' 8,000 at ' 960
per debenture and of ' 12,000 at ' 900 per debenture for the purpose of cancellation. Pass
necessary journal entries.

Question 6:

On 1'' April, 2015, Gitali Limited made an issue of 2000; 12% Debentures of '100 each. The
terms of issue provided for the redemption of '20,000 Debentures annually commencing
from 31st March 2016, either by drawings at par or purchase in open market. The company
invested the required amount on 30th April 2015 and created DRR on 31st March 2016.

On 31'1 March 2016, the company purchased for immediate cancellation '8000 Debentures
@96; '600(debentures @98 and '2,000 Debentures @98.5. The expenses of redemption
amounted to '70. Record the above transactions in Debenture Account in the company's
Ledger.

Question 7:

Shivoy Ltd. issued 40,000, 10% debentures of ' 100. It was decided to purchase 4,000
debentures for ' 93 each for the purpose of investment. After some time, these debentures
were sold @ ' 120 each in the market. Pass necessary journal entries.

Question 8:

On 1st April 2016, Ankita limited had '20,000; 15% Debentures of '100 each outstanding (due
for redemption). On 1st October 2016, the company purchased from open market 5,000
debentures @96 each as investment. Interest is payable on 30th September and 31'1 March
each year. On 31st March 2017, the company cancelled all the Debentures purchased on 1"
October 2016. Pass necessary journal entries assuming that there is sufficient balance in ORR
and the company has created required Debenture redemption investment.