accountancy xii commerce cbse practice paper

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ISSUE AND REDEMPTION OF DEBENTURE
1. C Ltd. Purchased machinery worth Rs. 200000 from E Ltd. On 1.1.13. Rs. 50,000 were paid immediately and the balance was
paid by issue of Rs. 1,60,000 12 % debentures in D Ltd. Pass the necessary journal entries.
2. X Ltd purchased assets ofY Ltd as under :
Plant and machinery :Rs. 80,00,000
Land and buildings : Rs. 72,00,000
The purchase consideration was Rs. 80,00,000. Rs. 20,00,000 were paid through bank and the remaining by issue of 6 %
debentures of Rs. 100 each at a premium of 20%.
Pass necessary journal entries.
3. Give journal entries in each of the following cases if the face value of a debenture is Rs. 100.
1. A debenture issued at Rs. 110 repayable at Rs. 100.
2. A debenture issued at Rs. 100 repayable at Rs. 105.
3. A debenture issued at Rs. 105 repayable at Rs. 105.
4. On 15-2-13 A Ltd., invited applications for issue of 100000 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 15-3-13 .pass journal entries
for the above transactions.
5. AB Ltd issued 5,00,000, 7% debentures ofRs. 50 each. Pass necessary journal entries in the books of the company for the
issue of debentures when debentures were :
1. Issued at par and redeemable at 8 % premium.
2. Issued at 4% premium redeemable at 5% premium.
3. Issued at 5% premium redeemable at par.
6. Pass necessary journal entries in the books of the company in following cases for redemption of 2000, 12 % deb entures of Rs.
10 each issued at par.
a. Debentures redeemed at par by conversion in to 12 % preference shares of Rs. 100 each.
b. Debentures redeemed at premium of 10 % by conversion in to equity shares at par.
c. Debentures redeemed at a premium of 10 % conversion in to equity shares at a premium of 25 %.
7. P ltd issued 4500 12 % debentures ofRs. 100 each at a discount of 6 % to be redeemed as follow.
1st year Nil
2nd year Nil
3rd year 3,00,000
4th year 1,50,000
8. On 31st March 2013 G Ltd had Rs. 8,00,000 debentures for redemption. The company had a balance of Rs. 3,40,000 in its
DRR account.Pass necessary journal entries for redemption of debentures.
9. On 31 st March 2013 M ltd had Rs. 10,00,000 9 % debentures due for redemption. The company had a balance of
Rs. 4,60,000 in its debentures redemption reserve account. Pass entries.
10. On 31 st March 2005 JanataLtd converted its Rs. 88,00,000, 6 % debentures in to equity shares of Rs. 20 each at a premium
of Rs. 2 per share.Pass necessary journal entries in the books of the company for redemption of debentures.
11. On 1-1-2013 X Ltd issued 500000 8 % debentures ofRs. 100 each, redeemable after 10 years.Debenture holders were given
the option to get their debentures redeemed at any time after 3 years at Rs. 105 per debentures.At the end of four years ,
debenture holders’ holding 40,000 debentures exercised their option and got their debentures redeemed. Record the necessary
journal entries for the issue and redemption of debentures in the books of the company.
12. On 1-2-2013 Kishan Ltd converted 9000, 8% Debentures of Rs. 100 each in to 8 % preference shares of Rs. 100 each issued
at discount of 10%. Pass necessary journal entries.
13. X Ltd issued Rs. 10,000 , 12 % debentures of Rs. Each payable Rs. 40 on application and Rs. 60 on allotment. The public
applied for 15,000 debentures.Applications of 9,000 debentures were accepted in full; applications of 2000 debentures were
alloted 1000 debentures and the remaining applications were rejected. All due money received on time. Journalize the
transactions.

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14. Aashirvad Company Ltd purchased assetsofthe book value of Rs. 200000 from anothercompany and agreed to make the
payment of purchase consideration by issuing 2000 10% debentures ofRs. 100 each. Record the journal entries.
15. Ram Company Ltd purchased assets ofthe book value of Rs. 220000 from anothercompany and agreed to make the payment
of purchase consideration by issuing 2000 10% debentures of Rs. 100 each at a premium of 10 %. Record the journal entries.
16. Navrang Company Ltd purchased assets ofthe book value of Rs. 1,90,000 from another company and agreed to make the
payment of purchase consideration by issuing 2000 10% debentures ofRs. 100 each at a discount of 5%. Record the journal
entries.
17. Romi Ltd acqured assets ofRs. 20 Lakh and took over creditors of Rs. 2 lakh from K.K enterprise. Romi Ltd issued 8%
debentures of Rs. 100 each at par as a purchase consideration. Record necessary entries in the books of Romi Ltd.
18. A company took Loan of Rs. 10,00,000 from Bank of Baroda and issued 10 % debentures ofRs. 12,00,000 of Rs. 100 each as
a collateral security. Explain how will you deal with the issue of debentures in the books of the company.
19. A Ltd issued 2000, 10 % debentures of Rs. 100 each on January 1, 2013 at a discount of 10 % redeemable at a premium of 10
%.
Give necessary entries relating to the issue of debentures and debenture interest for the period ending December 31, 2013
assuming that interest was paid half yearly on June 30 and December 31 and tax deducted at source is 10 %. A ltd follow calen dar
year as accounting year.
20. X Ltd issued 5000 16% debentures of Rs. 100 each at a discount of 5% repayable after 5 years at a premium. You are
required to write off the loss on issue of debentures overthe period of five years.
QUESTIONS TAKEN FROM SAMPLE QUESTION PAPERS ON ISSUE AND REDEMPTION OF DEBENTUR ES
21. Alpha Ltd. has 5,000, 8 % debentures of Rs. 100 each due for redemption on March 31, 2012. Assume that debentures
redemption reserve has a balance of 1,90,000 on that date. Record the necessary entries at the time of redemption of debentures.
22. What journal entries should be made for the issue of debentures in the following cases :
a. X Limited issued 30,000, 12 % debentures ofRs. 100 each at par, redeemable at a premium of 5 %.
b. Y limited issued 50,000, 12 % debentures ofRs. 100 each at a premium of 5 %, redeemable at par. 3
23.Bansika limited issued 55,000, 12 % debentures of Rs. 100 each. Give journal entries in the following cases when;
a. The debentures were issued at a premium of 10 %.
b. The debentures were issued as a collateral securities to bank against a loan of 45,00,000.
c. The debentures were issued to a supplier of a machine costing 49,50,000 as his full and final payment. 3
24. Pass journal entries for redemptiom of the following cases :
a. A joint stockcompany issued 20,000, 10 % debentures ofRs. 100 each at a premium of 5 %. These debentures were to
be redemed at a premium of 10 % through the issue of shares at a discount of 5 %.
b. 1,000, 12 % debentures ofRs. 100 each issued as a discount of 5 % and redeemable at par after 5 years were converted
in to shares of Rs. 10 each issued at a premium of 25 % before maturity. 3
25. Pass necessary journal entries for redemption of debentures in the following case ;
a. 10,000, 12 % debentures of Rs. 50 each issued at par and 50 % of the redemption to be made in cash,and the balance to
be redeemed at a premium of 25 % through the issue of fresh debentures.
26. A company issued 5,000, 12 % debentures of100 each. Assuming that all the debentures issued are taken up and paid for,
pass journal entries in the books of the company in each of the following cases:
b. issued at a discount of 5 %, redeemable at a premium of 10 %.
c. issued at a premium of 5 %, redeemable at a premium of 10 %. 3
27. On 1st January, 2010, Rhythm Ltd. Issued 1,000, 10 % debentures of Rs. 500 each at par. Debentures are redeemable after 7
years. However the company gave an option to debenture holders to get their debentures converted into equity shares of Rs. 100
each at a premium of 25 per share anytime after the expiry of one year.
Shivansh holder of 200 debentures,informed on Jan. 1, 2012 that he wanted to exercise the option of conversion of debentures .
The company accepted his request and converted his debentures in to equity shares.Pass the necessary journal entries to record
the issue of debentures on Jan.1, 2010 and conversion of debentures on Jan. 1, 2012. 3
28. Pass necessary journal entries for the issue of debentures in the following cases :
a. Jain Limited issued 750, 12 % debentures of Rs. 100 each at a discount of 10 % redeemable at a premium of 5 %.
b. Sohan limited issued 800, 9 % debentures of Rs. 100 each at a premium of 20 per debenture,redeemable at a premium
of 10 per debenture. 3
29. .Pass necessary journal entries for the issue of debentures in the following cases :
a. Roopak Limited issued Rs. 20,000, 9 % debentures ofRs. 100 each at a discount of 5 % redeemable at a premium of 5
%.
b. Harish limited issued Rs. 20,000, 9 % debentures ofRs. 100 each at a premium of 5 %, redeemable at a premium of 5%.

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c. Ankur limited issued Rs. 20,000, 9 % debentures ofRs. 100 each at par, redeemable at a premium of 5%. 3
30. Pass necessary journal entries for the issue of7 % debentures in the following cases :
a. 200 debentures of Rs. 150 each issued at a premium of 10 % redeemable at Rs. 200 each
b. 200 debentures of Rs. 200 each issued at a discount of 10 %, redeemable at par. 3
31.Tuteja construction Ltd. Had an outstanding balance of 1,26,00,000, 9 % debentures of Rs. 200 each redeemable at a premium
of 3 %. According to the terms of redemption, the company redeemed 50 % of the above debentures by converting them in to
shares of Rs. 10 each at a discount of 10 %. Record the entries for the redemption of debentures in the books of Tuteja
Construction Ltd. 3
32. Pass necessary journal entries for the issue of debentures in the following cases :
d. Rs. 40,000, 15% debentures ofRs. 100 each issued at par redeemable at a premium of 10 %.
e. Rs. 90,000, 15 % debentures of Rs. 100 each issued at a discount of 5 %, redeemable at a premium of 10 %. 3
33. Tanya Construction Ltd. Had an outstanding balance of 19,00,000, 14% debentures of Rs. 100 each redeemable at par.
According to the terms of redemption, the company redeemed 50 % of the above debentures by converting them in to shares of
Rs. 10 each at a premium of 25 %. Record the entries for the redemption of debentures in the books of company. 3
34.Pass the necessary journal entries for the issue of debentures in the following cases :
a. Rs. 40,000, 15% debentures ofRs. 100 each issued at a discount of 10 % redeemable at par.
b. Rs. 80,000, 15 % debentures of Rs. 100 each issued at a premium of 10 %, redeemable at a premium of 10 %. 3
35. Tara Construction Ltd. Had an outstanding balance of 75,00,000, 14% debentures of Rs. 150 each redeemable at par.
According to the terms of redemption, the company redeemed 1/4thof the above debentures by converting themin to shares of Rs.
20 each at a premium of Rs.5per share. Record the entries for the redemption of debentures in the books of Tara Construction
Ltd. 3
36. Pass necessary journal entries for the issue of 1000, 7 % debentures ofRs. 100 each in the following cases :
a. issued at a discount of 5 %, redeemable at par
b. issued at a premium of 5 %, redeemable at a premium of 10 %. 3
37. Tammana Construction Ltd. Had an outstanding balance of 5,00,000, 7% debentures of Rs. 100 each redeemable at a
premium of 10 %. According to the terms of redemption, the company redeemed 30 % of the above debentures by converting
them in to shares of Rs. 50 each at a premium of 20 %. Record the entries for the redemption of debentures in the books of
Tammana Construction Ltd. 3
38. Pass the necessary journal entries in the following cases.
a. Sunrise Ltd. Converted 500, 9 % debentures of Rs. 100 each issued at a discount of 10 % into equity
shares of Rs. 100 each issued at a premium of 25 %.
b. Britannia Ltd redeemed 3,000, 12 % debentures of Rs. 100 each which were issued at a discount of
Rs. 10 per debenture by converting them in to equity shares of Rs. 100 each, 90 paid.
Q.6 On 1st July 2007. A Ltd gave notice of their intention to redeem their outstanding Rs. 400,000 8%
Debentures on 1st January, 2008 @ rs. 102 each and offered the holders the following options-
(a) To subscibe for (i) 6% cumulative preference shares of Rs. 20 each at Rs. 22.50 per share, accepted
by debenture holders of Rs. 1,71,000 or (ii) 12% debentures were issued @96% accepted by the holders
of Rs. 1,44,000 Debentures.
(b) Remaining debentures to be redeemed for cash if neither of the option under (a) was accepted. Pass
necessary journal entries.
Q.7. Virani Industries Ltd. issued 1, 00,000, 10% Debentures of Rs. 10 each at a discount of 9% on April 1st,
2001 redeemable as follows:
31st March 2003 - 20,000 Debentures
31st March 2004 - 30,000 Debentures
31st March 2005 - 20,000 Debentures
31st March 2006 - Remaining Debentures
Calculate the amount of discount to be written off each year and prepare discount on issue of debentures
account.
Q.10 The following balance appeared in the books of Z Ltd. on January 1, 2004.
12% Debentures A/C Rs. 1, 50,000
Debenture Redemption Fund Rs. 1, 25,000
Debenture Redemption Fund Investment Rs. 1, 25,000
(Represented by Rs. 1, 47,500, 3% Govt. Securities)

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The annual installment added to the fund is Rs. 20,575. On December 31, 2004, the bank balance after
the receipt of interest on investment was Rs. 39,100. On that date all the investment were sold at 83%
and the debentures were duly redeemed. Show the necessary ledger accounts for the year 2004.
Q.11 On 01-04-1999, A Ltd., issued 2000, 7% debentures of Rs. 100 each at a discount of 10% redeemable at
par after 4 years by converting them into equity shares of Rs. 100 each issued at a premium of 25%.
Pass journal entries in the following cases:
(i) If debentures are redeemed on maturity.
(ii) If debentures are redeemed before maturity.
Q.12 Pass journal entries for the following at the time of issue of debentures:
(a) B Ltd. issues 30,000, 12% Debentures of Rs. 100 each at a discount of 5 % to be repaid at par at the
end of 5 years.
(b) E Ltd. issues Rs. 60,000, 12% Debentures of Rs. 100 each at a discount of 5 % repayable at a
premium of 10% at the end of 5 years.
(c) F Ltd. issues Rs. 70,000, 12% Debentures of Rs. 100 each at a premium of 5 % redeemable at 110%.
Q.1 Gupta Ltd has incurred a loss of Rs. 8,00,000 before payment of interest on debentures. The directors of
the company are of the opinion that interest on debentures is payable only when company earn profit. Do you
agree?
Q.2 As per latest guidelines governing the servicing of debentures a company is required to create on special
account. Name that account.
Q.3 Name the method of redemption of debentures in which there is no requirement of creating Debenture
Redemption Reserve.
Q.4 What is the nature of receipt of premium on issue of shares?
Q.5 Can a company issue shares at a premium in the absence of any express authority in its articles?
Q.6 What is the maximum rate of interest which the board of directors of a company can normally pay on calls-
in-advance if the articles are silent on the matter of such interest?
Q.7 State with reason whether a company can issue its shares at a discount in its Initial Public Offer (IPO).
Q.8 Why securities premium money cannot be used for payment of cash dividend among shareholders?
Q.9 Krishna Ltd. With paid-up share capital of Rs. 60,00,000 has a balance of Rs. 15,00,000 in securities
premium account. The company management does not want to carry over this balance. You are required to
suggest the method for utilizing this premium money that would achieve the objectives of the management and
maximize the return to shareholders.
Q.10 Distinguish between a share and a Debenture.
Q.11 Can share premium be utilised for the purchase of fixed assets?
Q.12 State in brief, the SEBI guidelines regarding Debenture Redemption Reserve (DRR).
Q.13 Which companies are exempted from the obligation of creating DRR by SEBI?
Q.14 What is the restriction on reissue of forfeited shares at discount?