Chapter-9 Issue of Debenture

  1. What do you mean by debenture? [1]

 

  1. State in brief the various types of debentures.? [1]

 

  1. What is meant by issue of Debentures for Cash? [1]

 

  1. Give the meaning of issue of Debentures as Collateral Security. [1]

 

  1. What is meant by Unsecured Debentures? [1]

 

  1. What is the nature of interest on Debentures? [1]

 

  1. What is meant by issue of Debentures for Consideration other than Cash? [1]

 

  1. Give any one difference between Share and Debenture. [1]

 

  1. Why would an investor prefer to invest in the debentures of a company rather than in its share? [1]

 

  1. Why would an investor prefer to invest partly in shares and partly in the debentures of a company?[1]

 

  1. What journal entry will you record when 20,000 Debentures of Rs.100 each are issued as collateral security against a Bank Loan of Rs.1,60,000. [1]

 

  1. Pass necessary Journal entries for the following transaction: Issued 60,000, 9% Debentures of Rs.75 each at a premium of Rs.25 per Debentures [3]

 

  1. Pass necessary journal entries in the books of Boxer Limited for the following transaction: Issued 1875, 8% Debentures of Rs.100 each at a premium of Rs.10 each redeemable after three years. [3]

 

  1. Pass necessary journal entries in the books of Boxer Limited for the following transaction: Issued 58,000, 9% Debentures of Rs.1,000 each at a premium of 10%. [3]

 

  1. Ram Limited issued 60,000, 9% Debentures of Rs.100 each redeemable at a premium of 10% after three years. Pass the necessary journal entries for the issue of 9% debentures. (3)

 

  1. On 1.4.2009 Boxer Limited issued 20,00,000, 6% debentures of Rs.100 each at a discount of 4% redeemable at a premium of 5% after 3 years. The amount was payable as follows: On Application ……………. Rs.50 Per Debenture On Allotment ……………. … Balance after discount Record necessary journal entries for the issue of debentures. (3)

 

  1. New Ventures Ltd. purchased plant of the book value of Rs 4,95,000 from another firm. The purchase consideration was paid by issuing 10% debentures of Rs 100 each. Assume debentures have been issued, (i) at par, (ii) at discount of 10%, (iii) at premium of 10%.[4]

 

  1. Boxer Limited issued 1,000, 7% Debentures of Rs.1,000 each at a discount of 5%. Pass necessary journal entries for the issue of debentures in the following cases: (i) When the debentures were redeemable at par (ii) When the debentures were redeemable at a premium of 6% (3)

 

  1. Sachin Limited issued 10,000, 8% Debentures of Rs.100 each at a premium of 10% redeemable at a par after 5 years. Pass necessary journal entries for the issue of 9% Debentures. (3)

 

  1. On 15.2.2012 Boxer Limited invited applications for issue of 1,00,000, 9% Debentures of Rs.100 each at a discount of 6%, redeemable at par after 3 years. The full amount was payable on application and the debentures were issued on 15.3.2012. Pass necessary journal entries for the above transactions. (4)

 

  1. Boxer Limited invited applications for issuing 7,500, 12% Debentures of Rs.100 each at a premium of Rs.35 per debentures. The full amount was payable on application. Applications were received for 10,000 Debentures. Applications for 2,500 Debentures were rejected and the application money was refunded. Debentures were allotted to the remaining applicants. Pass necessary journal entries for the above transactions in the books of Boxer Limited. [3]

 

  1. Ajay Limited issued 5,00,000, 7% Debentures of Rs.50 each. Pass necessary journal entries in the books of the company for the issue of debentures when debentures were: (i) Issued at Par, redeemable at 8% premium (ii)Issued at 4% premium, redeemable at 5% premium (iii) Issued at 5% premium, redeemable at par [3]

 

  1. Pass necessary Journal entries for the issue of 7% Debentures in the following cases: (i) 100 Debentures of Rs.100 each issued at Rs.105 each payable at Rs.100 each. (ii) 100 Debentures of Rs.100 each issued at Rs.100 each payable at Rs.105 each. (iii) 100 Debentures of Rs.100 each issued at Rs.105 each payable at Rs.108 each. [3]

 

  1. Give journal entries in each of the following cases if the face value of a debenture is Rs.100: (i) A debenture issued at Rs.110 repayable at Rs.100. (ii) A debenture issued at Rs.100 repayable at Rs.105. (iii) A debenture issued at Rs.105 repayable at Rs.105. [3]

 

  1. Boxer Limited invited applications for issuing 3,000, 12% Debentures of Rs.100 each at a premium of Rs.50 per Debenture. The full amount was payable on application. Application were received for 4,000 Debentures. Applications for 1,000 debentures were rejected and application money was refunded. Debentures were allotted to the remaining applicants. Pass necessary journal entries for the above transactions in the books of Boxer Limited. [3]

 

  1. Boxer Limited invited applications for issuing 10,000, 12% Debentures of Rs.100 each at a premium of Rs.70 per debenture. The full amount was payable on application. Applications were received for 13,500 debentures. Applications for 3,500 debentures were rejected and application money was refunded. Debentures were allotted to the remaining applications. Pass necessary journal entries in the books of Boxer Limited. (3)
  2. Boxer Limited issued 20,000, 12% Debenturs of Rs.50 each. Pass necessary journal entries for the issue and redemption of debentures in the following cases: (i) Issued at par and redeemable at a premium of 10% (ii)Issued at a premium of 10% and redeemable at a premium of 20%. (iii) Issued at par and 50% of the redemption to be made in cash and the balance to be redeemed at a premium of 20% through the issue of fresh debentures. (6)

 

  1. Pass the necessary journal entries for the issue and redemption of Debentures in the following cases: (i) 15,000, 9% Debentures of Rs.250 each issued at 5% premium, repayable at 15% premium. (ii) 2,00,000, 12% Debentures of Rs.10 each issued at 8% premium repayable at par. (6)

 

  1. Boxer Limited issued 5,000, 9% Debentures of Rs.500 each. Pass the necessary journal entries for the issue of debentures in the books of the company in the following cases: (i) When Debentures are issued at 10% premium and redeemable at par. (ii) When debentures are issued at par and redeemable at 10% premium (iii) When Debentures are issued at 5% premium and redeemable at 10% premium. (6)

 

 

  1. Boxer Limited purchased Machinery for Rs.2,97,000 from Kuku Limited. The payment was made by issue of 9% debentures of Rs.100 each. Pass necessary journal entries for the purchase of Machinery and issue of debentures when: (i) Debentures are issued at par (ii) Debentures are issued at 10% premium.[3]

 

  1. ASHOKA Limited purchased Machinery worth Rs.2,00,000 from MADDY Limited on 1.1.2014. Rs.50,000 were paid immediately and the balance was paid by issue of Rs.1,60,000, 12% Debentures in ASHOKA Limited. Pass necessary journal entries for recording the transactions in the books of ASHOKA Limited. [3]

 

  1. Boxer Limited purchased machinery for Rs.2,88,000. The purchase price was to be satisfied by issue of debentures at a discount of 4%. Give journal entries for the above transaction. [3]

 

  1. Boxer Limited purchased Machinery worth Rs.4,00,000 from MADDY Limited on 1.1.2013. Rs.1,00,000 was paid immediately and the balance was paid by issue of Rs.2,80,000, 12% Debentures in Boxer Limited. Pass necessary journal entries to record these transactions in the books of Boxer Limited. [3]

 

  1. Boxer Limited purchased machinery worth Rs.55,000 from MADDY Limited. 10% was paid by Boxer Limited by accepting a bill of exchange in favour of MADDY Limited and the balance was paid by issue of 9% Debentures of Rs.100 each at par, redeemable after five years. Pass necessary journal entries in the books of Boxer Limited. [3]

 

  1. ASHOKA Limited purchased Machinery for Rs.5,50,000 from MADDY Limited. Rs.55,000 were paid by ASHOKA Limited in cash and the balance was paid by issue of 9% debentures of Rs.1,000 each at 10% premium redeemable after three years. Pass necessary journal entries in the books of company. [3]

 

  1. Boxer Limited purchased furniture worth Rs.2,20,000 from MADDY Furniture Mart. 50% of the amount was paid to MADDY Furniture Mart by accepting a bill of exchange and for the balance the company issued 9% debentures of Rs.100 each at a premium of 10% in favour of MADDY Furniture Mart. Give journal entries. (3)

 

  1. Boxer Limited purchased the assets of MADDY Limited for Rs.2,00,000. It also agreed to takeover the liabilities of MADDY Limited amounting to Rs.50,000 for a purchase consideration of Rs.1,60,000. The payment to MADDY Limited was made by issue of 12% debentures of Rs.100 each at par. Pass the necessary journal entries in the books of Boxer Limited. (4)

 

  1. Boxer Limited purchased assets of MADDY Limited as under: Plant and Machinery Rs.8,00,000 Land and Building Rs.72,00,000 The purchase consideration was Rs.80,00,000. Rs.20,00,000 were paid through cheque and the reamaining by issue of 6% debentures of Rs.100 each at a premium of 20%. (4)

 

  1. Boxer Limited purchased the business of MADDY Limited for Rs.90,000. Payment was made by issue of Equity Shares of Rs.10 each. What journal entries will be made when: (i) Shares are issued at 20% premium (ii)Shares are issued at 10% Discount (4)

 

  1. Boxer Limited issued 10,000, 9% Debentures of Rs.100 each. Pass the necessary journal entries for issuing of debentures in the following cause: (i) When Debentures are issued at par and redeemable at par (ii) When the Debentures are issued at par and redeemable at premium of 10% (iii) When debentures are issued at a premium of 25% to the Vendors for the purchase of Machinery worth Rs.12,50,000. (iv) When Debentures are issued at a premium of 250 each and are redeemable at par. [4]

 

  1. Boxer Limited issued 25,000, 10% debentures of Rs.100 each. Give journal entries in each of the following cases when: (i) The Debentures were issued at a premium of 20% (ii) The Debentures were issued to a collateral security to Bank against a loan of Rs.20,00,000. (iii) The Debentures were issued to a supplier of Machinery costing Rs.28,00,000 as full and final payment. [4]

 

  1. ASHOKA Limited obtained a loan of Rs.4,00,000 from HDFC Bank. The company issued 5,000, 9% Debentures of Rs.100 each as a collateral security for the same. Show how these items will be presented in the Balance Sheet of the comapny. [4]

 

  1. Boxer Limited obtained a loan of Rs.3,00,000 from HDFC Bank. The company issued 4,000, 9% Debentures of Rs.100 each as a collateral security for the same. Show how these items will be presented in the Balance Sheet of the Company.

 

  1. Boxer Limited obtained a loan of Rs.6,00,000 from ICICI Bank. The company issued 7,000, 9% Debentures of Rs.100 each as a collateral Security for the same. Show how these items will be presented in the Balance Sheet of the company. [4]

 

  1. Boxer Limited took over assets of Rs.16,80,000 and Liabilities of Rs.1,60,000 of MADDY Limited at an agreed value of Rs.14,40,000. Boxer Limited paid to MADDY Limited by issue of 9% Debentures of Rs.100 each at a premium of 20%. Pass necessary journal entries. [4]

 

  1. Boxer Limited purchaed the assets of MADDY Limited for Rs.10,00,000. It also agreed to take over the liabilities of MADDY Limited amounted to Rs.2,50,000 for purchase consideration of Rs.8,00,000. The payment of MADDY Limited was made by issue of 12% Debentures of Rs.100 each at par. Pass necessary journal entries. [4]

 

  1. Boxer Limited acquired assets of Rs.12,50,000 and took over creditors of Rs.1,25,000 from MADDY Enterprises. Boxer Limited issued 8% Debentures of Rs.100 each at a premium of 25% as purchase consideration. Record the necessary Journal entries in the books of Boxer Limited. [4]

 

  1. ASHOKA Limited purchased Plant and Machinery for Rs.15,00,000 Payable as Rs.3,00,000 in cash and balance by allotment of 6% Debentures of Rs.7,500 each at a premium of 25%. Journalise the above transactions. [4]

 

  1. Pass the necessary Journal entries for issue of 7% Debentures of Rs.100 each in the following cases: (a) 400 Debentures of Rs.150 each issued at 10% premium redeemable at Rs.200 each. (b) 400 Debenture s of Rs.200 each issued at a discount of 10% redeemable at par. [4]

 

  1. AB Ltd issued 1000 12% debentures of Rs 1,000 each on 1st January 2014. Make journal entries for the year ended 31st December 2014 assuming that interest was payable yearly on 31st December and tax deducted at source is @10%.[4]

Author: Ravi Kashyap

Commerce Expert

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