Commerce Exam > Commerce Notes > Accountancy Class 12 > Redemption of Debentures ( Part - 5)
Redemption of Debentures ( Part - 5) | Accountancy Class 12 - Commerce PDF Download
Question 20:
Venus Ltd. had 9,000, 9% Debentures of ₹ 100 each due for redemption . These debentures are to be redeemed in 3 equal installments (starting from 31st March,2015) at a premium of 10%. The company had a balance of ₹ 25,000 in the Debentures Redemption Reserve .
Pass necessary entries for redemption of debentures assuming that company transfer the balance of DRR to General Reserve after redeeming all the debentures.
ANSWER:
Question 21:
Tata Motors Ltd. issued 40,000;7% Debentures of ₹ 100 each on 1st July,2009 redeemable at premium of 5% as under:
It was decided to transfer amount out of profit to Debentures Redemption Reserve ₹ 2,00,000 on 31st March, 2012; ₹ 4,00,000 on 31st March , 2013 and balance on 31st March, 2014. It invested the required amount in terms of the Companies Act, 2013 in Government Securities and decided to realise them after last redemption . Paas journal entries ignoring interest.
ANSWER:
Page No 10.32:
Question 22:
'Ananya Ltd.' had an authorised capital of ₹ 10,00,00,000 divided into 10,00,000 equity shares of ₹ 100 each. The company had already issued 2,00,000 shares. The dividend paid per share for the year ended 31st March,2007 was ₹ 30 . The management decided to export its products to African countries . To meet the requirements of additional funds, the finance manager put up the following three alternate proposals before the Board of Directors:
(a) Issue 47,500 equity shares at a premium of ₹ 100 per share .
(b) Obtain a long-term loan from bank which was available at 12% per annum.
(c) Issue 9% Debentures at a discount of 5%.
After evaluating these alternatives , the company decided to issue 1,00,000,9% Debentures on 1st April,2008. The face value of each debentures was ₹ 100 . These debentures were redeemable in four installments starting from the end of third year, which were as follows:
Prepare 9% Debenture Account form 1st April, 2008 till all the debentures were redeemed.
ANSWER:
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FAQs on Redemption of Debentures ( Part - 5) - Accountancy Class 12 - Commerce
| 1. What is the process of redemption of debentures? |  |
Ans. The process of redemption of debentures involves the repayment of the principal amount along with any interest due to the debenture holders by the issuing company. This can be done either by paying a lump sum amount or through periodic installments.
| 2. Can a company redeem debentures before their maturity date? | |
Ans. Yes, a company can redeem debentures before their maturity date if the terms and conditions of the debenture issue allow for early redemption. This is known as premature redemption and can be done with the consent of the debenture holders or as per the predetermined terms specified in the debenture agreement.
| 3. What are the consequences of non-redemption of debentures by a company? | |
Ans. If a company fails to redeem debentures on the specified maturity date, it can lead to legal consequences. Debenture holders can take legal action against the company for non-payment, which may result in the company being ordered to pay the outstanding amount with interest and potentially face penalties or fines.
| 4. Is it mandatory for a company to create a Debenture Redemption Reserve (DRR) for redeeming debentures? | |
Ans. Yes, as per the Companies Act, 2013 in India, it is mandatory for companies to create a Debenture Redemption Reserve (DRR) before redeeming debentures. The DRR is created by transferring a certain percentage of the company's profits to a reserve account, which is then utilized for the redemption of debentures.
| 5. Can a company raise funds by issuing fresh debentures to redeem existing debentures? | |
Ans. Yes, a company can raise funds by issuing fresh debentures to redeem existing debentures. This is known as the debenture swap or debenture refinancing. By issuing new debentures, the company can raise funds to repay the existing debenture holders, thereby fulfilling its redemption obligations.
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