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Sample Questions - Redemption of Debentures | Crash Course of Accountancy - Class 12 - Commerce PDF Download

                                          Redemption of Debentures
Time – 50 mins

M.M. - 30


Q1. X Ltd. issued 6,000 10% Debentures of ? 100 each at a premium of 8% on 30th June, 2014 redeemable on 30th December 2015. How much amount of Debenture Redemption Reserve is to be created before redemption of debentures? (1 mark)

Q2. Where is the debenture redemption reserve is shown in the balance sheet? (1 mark)

Q3. Rule 18 (7) of Companies (Share Capital and Debentures) Rules, 2014 exempts the following types of Companies from creating DRR__________________ & ____________________. (1 mark)

Q4. X Ltd. redeemed Rs. 40,00,000, 6% debentures at a premium of 15% out of profits on 31-3-2015. The company had a Debenture Redemption Reserve of Rs. 7,50,000. Assuming that the Company has the required balance in Debenture Redemption Investment Account, pass necessary journal entries for the redemption of debentures. (3 marks)

Q5. X Ltd. redeemed Rs. 20,00,000, 6% debentures at a premium of 5% out of profits on 31-3-2015. The company had a Debenture Redemption Reserve of Rs. 2,50,000. Assuming that the Company has the required balance in Debenture Redemption Investment Account, pass necessary journal entries for the redemption of debentures. (4 marks)

Q6. Ruchi Ltd issued 42,000, 7% Debentures of 100 each on 1st April, 2011, redeemable at a premium of 8% on 31st March 2015. The Company decided to create required Debenture Redemption Reserve on 31st March 2014. The company invested the funds as required by law in a fixed deposit with State Bank of India on 1st April, 2014 earning interest @10% per annum. Tax was deducted at source by the bank on interest @10% per annum. Pass necessary Journal Entries regarding issue and redemption of debentures. (6 marks)

Q7. X ltd. Purchased assets of Rs. 6,00,000 and liabilities of Rs. 1,00,000 at an agreed value of Rs. 5,50,000 on 30/6/2011 from Y ltd. The company issued 6% debentures of Rs.100 each at a premium of 10% to redeemed on 30/6/15 at a premium of 5%. Pass necessary journal entries for the redemption of debentures. (6 marks)

Q8. X Ltd. issued Rs. 80,000 6% Debentures of Rs. 100 each at a premium of 5% on June 30, 2011. The issue was fully subscribed. The Board of Directors decided to transfer the required amount to Debenture Redemption Reserve. It was decided to invest 15% of the face value of debentures to be redeemed towards Debenture Redemption Investment. The debentures were repayable at a premium of 10% as follows on:
31/3/15  Rs. 10,000 debenture.
31/3/16  Rs. 30,000 debenture.
31/3/17  Rs. 40,000 debenture. (8 marks)

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FAQs on Sample Questions - Redemption of Debentures - Crash Course of Accountancy - Class 12 - Commerce

1. What is the meaning of redemption of debentures?
Ans. Redemption of debentures refers to the process of repaying or buying back the debentures issued by a company before their maturity date. It is a way for the company to repay its debt to the debenture holders.
2. How can a company redeem its debentures?
Ans. A company can redeem its debentures by following the redemption terms mentioned in the debenture agreement. It can either redeem the debentures at par value or at a premium, depending on the terms and conditions agreed upon at the time of issuing the debentures.
3. What are the methods of redemption of debentures?
Ans. There are various methods through which a company can redeem its debentures. These include redemption in lump sum, redemption by installments, and redemption by conversion. The method chosen depends on the company's financial position and the terms mentioned in the debenture agreement.
4. Can a company redeem its debentures before the maturity date?
Ans. Yes, a company can redeem its debentures before the maturity date if it has the necessary funds and follows the redemption terms mentioned in the debenture agreement. Early redemption may also be subject to any applicable legal or regulatory requirements.
5. What are the implications for debenture holders in the redemption process?
Ans. When a company redeems its debentures, the debenture holders receive the repayment of their principal amount along with any agreed-upon interest or premium. The redemption process allows debenture holders to recover their investment and end their association with the company as creditors.
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