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

                                                           Issue of Debentures
Time – 50 mins

M.M. - 30


Q1. Globe Ltd. issues 20,000, 9% debentures or 100 each at a discount of 5% redeemable at the end of 5 years at a premium of 6%. For what amount loss on Issue of Debentures Account' will be debited? (1 mark)

Q2. 1,000, 14% debentures of 100 each issued at a discount of 5% to a supplier of machinery, find the amount of purchase consideration? (1 mark)

Q3. What are zero coupon bonds? (1 mark)

Q4. Explain with an imaginary example how issue of debenture as collateral security is shown in the balance sheet of a company when it is recorded in the books of accounts. (3 marks)

Q5. King Ltd took over Assets of 25,00,000 and liabilities of 6,00,000 of Queen Ltd. King Ltd paid the purchase consideration by issuing 10,000  debentures of 100 each at a premium of 10% and 11,00,000 by Bank Draft. Pass necessary journal entries. (3 marks)

Q6. On 1-1-2005, Fast Computers Ltd. issued 20,00,000, 6% debentures of 100 each at a discount of 4% redeemable at a premium of 5% after three years. The amount was payable as follows: On application 50 per debenture.

Balance on allotment. Record the necessary journal entries for issue of debentures. (3 marks)

Q7. X Ltd. took over the Assets of Rs. 3,60,000 and Creditors of Rs. 42,000 of Y & Co. for an agreed amount of Rs. 3,30,000 by the issue of fully paid 12% Debentures of Rs. 100 each at a premium of 10%.These Debentures are redeemable at a premium of 5% after 3 years. Pass the necessary journal entries in the books of X. Ltd. (4 marks)

Q8. A Ltd. Company issued debentures of ₹1,00,000 which were issued as follows:

(1) For cash at 90% 50,000 (Nominal)

(2) For creditor for 20,000 Capital Expenditure in satisfaction of his claim 25,000 (Nominal)

(3) To Bankers for a loan of 15,000 as collateral security 25,000 (Nominal) The issue (1) and (2) are redeemable at the end of 10 years at premium of 10%.pass entries? (4 marks)

Q9. X ltd. issued 6,000, 12% debentures of Rs. 200 each on April 01, 2010 at a discount of 15% redeemable at a premium of 20%. Give journal entries relating to the issue of debentures and debentures interest for the period ending March 31, 2011 assuming that interest is paid half yearly on September 30 and March 31 and tax deducted at source is 20%. Pass necessary journal entries. (4 marks)

Q10. On 1.4.2015, X Ltd. issued 1,20,000 15% Debentures of Rs. 100 each at 95% redeemable at par and redeemable at a premium of 10% as follows:
Sample Questions - Issue of Debentures | Crash Course of Accountancy - Class 12 - Commerce
Pass entries and prepare loss on issue of debentures account also. (6 marks)

The document Sample Questions - Issue of Debentures | Crash Course of Accountancy - Class 12 - Commerce is a part of the Commerce Course Crash Course of Accountancy - Class 12.
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FAQs on Sample Questions - Issue of Debentures - Crash Course of Accountancy - Class 12 - Commerce

1. What are debentures in commerce?
Ans. Debentures in commerce refer to a type of long-term debt instrument issued by companies to raise funds from the public. They are usually issued by corporations and are backed by the company's assets or a specific source of income.
2. How are debentures different from shares?
Ans. Debentures and shares are two different types of securities issued by companies. While shares represent ownership in a company, debentures represent debt. Debenture holders are creditors of the company and have fixed interest rates, whereas shareholders have ownership rights and can receive dividends.
3. What is the process of issuing debentures?
Ans. The process of issuing debentures involves the following steps: 1. Determining the need for funds and the terms of the debentures. 2. Obtaining necessary approvals from shareholders and regulatory authorities. 3. Drafting and filing a prospectus or offer document with the Securities and Exchange Board of India (SEBI) for public issuances. 4. Marketing and promoting the debentures to potential investors. 5. Collecting applications and allotting the debentures to successful applicants. 6. Listing the debentures on stock exchanges (if applicable).
4. What are the advantages of investing in debentures?
Ans. Investing in debentures offers several advantages, including: 1. Fixed and regular income: Debentures provide investors with a fixed interest rate, ensuring a steady flow of income. 2. Priority in repayment: In case of liquidation or bankruptcy, debenture holders have priority over shareholders in receiving their principal and interest payments. 3. Diversification: Debentures allow investors to diversify their investment portfolio beyond equities, reducing the overall risk. 4. Lower volatility: Debentures typically have lower price volatility compared to shares, making them a more stable investment option. 5. Tax benefits: Some types of debentures offer tax benefits, such as tax-free interest income or tax deductions on investments.
5. What are the risks associated with investing in debentures?
Ans. While debentures offer certain advantages, they also come with some risks, including: 1. Default risk: There is a risk that the issuer may default on interest or principal payments. Investors should carefully evaluate the creditworthiness of the issuer before investing. 2. Interest rate risk: Debenture prices are inversely related to interest rates. If interest rates rise, the value of existing debentures may decrease, resulting in capital losses for investors. 3. Liquidity risk: Debentures may have limited liquidity, especially if they are not listed on stock exchanges. Selling debentures before maturity may be challenging, and investors may have to sell at a discount. 4. Market risk: Debenture prices can be influenced by market conditions and investor sentiment. Economic factors and changes in the company's financial health can affect the market value of debentures. 5. Call risk: Some debentures may have a call option, allowing the issuer to redeem them before maturity. This exposes investors to reinvestment risk if they are unable to find similar investment opportunities with comparable returns.
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