Tag: issue of debentures for consideration other than cash

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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

Bikano Industries Ltd. purchased a plant for Rs. 100,000 payable Rs. 37,000 in cash and balance by issue of 11% debentures of Rs. 100 each at a discount of 10%. The vendor will be issued ______.

  1. 630 debentures of Rs. 100 each

  2. 700 debentures of Rs. 100 each

  3. 770 debentures of Rs. 100 each

  4. 600 debentures of Rs. 100 each
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Total price is 100,000. Cash paid is 37,000. Balance to be paid in debentures is 63,000. Issue price per debenture is 100 - 10% = 90. Number of debentures = 63,000 / 90 = 700.

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

On issue of Debentures, Account to be credited is?

  1. Debenture Capital

  2. Debenture

  3. Loan

  4. Capital
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

When debentures are issued, the Debentures Account is credited to reflect the liability created.

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, no amount is received for debentures.

  1. True

  2. False
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

When loan is taken from Bank or Financial Institution, debentures may be issued as collateral security. Any cash is not received against these debenture. On default of repayment of loan, loan may be converted into debentures by Bank/Financial Institution.

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

Unless written off, the loss on issue of debentures is shown.

  1. On the assets side of Balance Sheet

  2. On the debit side of Profit and Loss Account

  3. By way of deduction from the amount of debentures

  4. On the liabilities side of Balance Sheet
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Loss on issue of debentures, until written off, is shown as a miscellaneous expenditure on the assets side of the balance sheet.

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

If debentures are issued as consideration for purchase of any fixed asset, the entry is?

  1. Debit Asset A/c; Credit Vendor A/c

  2. Debit Asset A/c; Credit Bank A/c

  3. Debit Asset A/c; Credit Debentures A/c

  4. Debit Debenture A/c; Credit Asset A/c

  5. Debit Debenture A/c; Credit Vendors A/c
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

Debentures can be issued.

  1. For consideration other wise than cash

  2. As collateral security for borrowings from financial institutions

  3. In lieu of dividends

  4. Both (a) and (b)
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Debentures can be issued for consideration other than cash and as collateral security for loans.

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 debenture holder gets.

  1. Dividend

  2. Right prescribed articles

  3. Ownership of the company

  4. Interest at fixed rate
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

A debenture holder is a creditor of the company and is entitled to receive interest at a fixed rate, regardless of the company's profit.

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 underwriting commission in the case of issue of debentures cannot exceed.

  1. $2\%$

  2. $2.5\%$

  3. $3\%$

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

As per the Companies Act, the underwriting commission for debentures is capped at 2.5%.

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

Maximum underwriting commission payable on issue of Debentures as per Companies Act is ______________.

  1. $5\%$

  2. $2^{1 _{/2}}\%$

  3. $2\%$

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

The maximum underwriting commission for debentures is 2.5% (or 2 1/2%).