Tag: company accounts - issue of debentures

Quizzes (8) Questions (60)

Questions Related to company accounts - issue of debentures

Multiple choice book keeping and accountancy company accounts - issue of debentures issue of debentures for consideration other than cash types of debentures issue of debentures at par, premium, discount, collateral security and for consideration other than cash

ABC Ltd. has issued $3,000$ fully Convertible Debentures of Rs. $100$ each. Each Debentures is convertible into $8$ shares of Rs. $10$ each. Amount of share capital credited on conversion will be.

  1. Rs. $2,40,000$

  2. Rs. $60,000$

  3. Rs. $3,00,000$

  4. Rs. $80,000$
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

3,000 debentures * 8 shares per debenture = 24,000 shares. 24,000 shares * 10 face value = 2,40,000 credited to share capital.

Multiple choice book keeping and accountancy company accounts - issue of debentures issue of debentures for consideration other than cash types of debentures issue of debentures at par, premium, discount, collateral security and for consideration other than cash

The following entry appears in the books of Vikas Ltd.

Rs. Rs.
Bank Account $95,000$
Loss on issue of Debenture A/c $13,000$
To $8\%$ Debentures A/c $1,00,000$
To Premium on Redemption of Debentures A/c $8,000$

Debentures have been issued at a discount of.

  1. $10\%$

  2. $7\%$

  3. $6\%$

  4. $5\%$
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

The debentures are 1,00,000. The bank received 95,000. The difference of 5,000 is the discount. 5,000 / 1,00,000 = 5%.

Multiple choice book keeping and accountancy company accounts - issue of debentures issue of debentures for consideration other than cash types of debentures issue of debentures at par, premium, discount, collateral security and for consideration other than cash

When debentures are issued as collateral security to a banker, which account will be debited.

  1. Bank A/c

  2. Debenture Suspense Account

  3. Debenture Redemption A/c

  4. Debenture holders A/c
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

When debentures are issued as collateral security, the Debenture Suspense Account is debited to record the issuance of the debentures as a contingent liability.

Multiple choice book keeping and accountancy company accounts - issue of debentures issue of debentures for consideration other than cash types of debentures issue of debentures at par, premium, discount, collateral security and for consideration other than cash

X Co. Ltd purchased assets worth Rs. $28,80,000$. It issued debentures of Rs. $100$ each at a discount of $4\%$ in full satisfaction of the purchase consideration. The number of debentures issued to the various of asset is?

  1. $30,000$

  2. $28,800$

  3. $32,000$

  4. $35,000$
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

The purchase consideration is Rs. 28,80,000. The issue price per debenture is Rs. 100 minus 4% discount (Rs. 4), which equals Rs. 96. Dividing 28,80,000 by 96 gives 30,000 debentures.

Multiple choice book keeping and accountancy company accounts - issue of debentures issue of debentures for consideration other than cash types of debentures issue of debentures at par, premium, discount, collateral security and for consideration other than cash

The following journal entry appears in the books of X Co. Ltd.

Bank A/c Dr. Rs. $4,75,000$
Loss on Issue of Deb. A/c Dr. Rs. $75,000$
To $12\%$ Debentures A/c $5,00,000$
To Premium on redemption of Deb. A/c $50,000$

Debentures have been issued at a discount of.

  1. $15\%$

  2. $5\%$

  3. $10\%$

  4. $20\%$
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

The total face value of debentures is Rs. 5,00,000. The bank received Rs. 4,75,000. The difference of Rs. 25,000 represents the discount on issue. Discount percentage = (25,000 / 5,00,000) * 100 = 5%.

Multiple choice book keeping and accountancy company accounts - issue of debentures issue of debentures for consideration other than cash types of debentures issue of debentures at par, premium, discount, collateral security and for consideration other than cash

When debentures of Rs. $1,00,000$ are issued as collateral security, against a loan of Rs. $1,50,000$, the entry for issue of debentures will be

  1. Credit Debentures Rs. $1,50,000$ and debit cash A/c. Rs. $1,50,000$

  2. Debit Debenture Suspense A/c Rs. $1,00,000$ and credit Cash A/c Rs. $1,00,000$

  3. Debit Debenture Suspense A/c Rs. $1,00,000$ and Credit Debentures A/c Rs. $1,00,000$

  4. Debit Cash A/c Rs. $1,50,000$ and credit Bank A/c Rs. $1,50,000$
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

When debentures are issued as collateral security, the standard accounting entry is to debit Debenture Suspense A/c and credit Debentures A/c with the face value of the debentures issued.

Multiple choice book keeping and accountancy company accounts - issue of debentures issue of debentures for consideration other than cash types of debentures issue of debentures at par, premium, discount, collateral security and for consideration other than cash

It is uncommon is case of debentures issued as collateral security that______.

  1. Interest be given on debentures

  2. Accounting entry is not made

  3. Existence of debenture given as a note in balance sheet

  4. None of the above
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

It is standard practice to disclose the existence of debentures issued as collateral security in the notes to the balance sheet, and interest is generally not paid on collateral debentures unless the loan defaults. Since the options provided do not describe an 'uncommon' event, 'None of the above' is the correct choice.

Multiple choice book keeping and accountancy company accounts - issue of debentures issue of debentures for consideration other than cash types of debentures issue of debentures at par, premium, discount, collateral security and for consideration other than cash

Features of debentures issued as collateral securities. Select from the given options______.

  1. Only interest on loan to be paid

  2. Interest on loan as well debenture to be paid

  3. Debenture issued as a security towards the loan taken

  4. Both a & b
Reveal answer Fill a bubble to check yourself
D Correct answer
Multiple choice book keeping and accountancy company accounts - issue of debentures issue of debentures for consideration other than cash types of debentures issue of debentures at par, premium, discount, collateral security and for consideration other than cash

P Ltd. issued $10,000$, $12\%$ debentures of Rs. $100$ 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 will be.

  1. Rs. $1,60,000$

  2. Rs. $80,000$

  3. Rs. $20,000$

  4. Rs. $16,000$
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

The loss on redemption is the premium payable on redemption, which is 20% of Rs. 100 = Rs. 20 per debenture. For 10,000 debentures, the total loss is Rs. 2,00,000. Over 10 years, the annual write-off is 2,00,000 / 10 = Rs. 20,000.

Multiple choice book keeping and accountancy company accounts - issue of debentures issue of debentures for consideration other than cash types of debentures issue of debentures at par, premium, discount, collateral security and for consideration other than cash

A Ltd issued $3,000$ $15\%$ Debentures of Rs. $100$ each at a discount of $7.5\%$ payable at a premium of $5\%$ at the end of $5$ years. The loss on issue of debentures will be.

  1. Rs. $22,500$

  2. Rs. $30,000$

  3. Rs. $37,500$

  4. Rs. $45,000$
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

The loss on issue includes the discount on issue (7.5% of 100 = 7.5) and the premium on redemption (5% of 100 = 5). Total loss per debenture = 7.5 + 5 = 12.5. For 3,000 debentures, total loss = 3,000 * 12.5 = 37,500.