Commerce Exam  >  Commerce Notes  >  Accountancy Class 12  >  Issue of Debentures ( Part - 2)

Issue of Debentures ( Part - 2) | Accountancy Class 12 - Commerce PDF Download

Page No 9.54:
Question 16:
Reliance Ltd. purchased machinery costing ₹1,35,000. It was agreed that the purchase consideration be paid by issuing 9% Debentures of ₹100 each. Assume debentures have been issued
(i) at par and
(ii)at a discount of 10%.
Give necessary journal entries.
ANSWER:

Issue of Debentures ( Part - 2) | Accountancy Class 12 - Commerce
Issue of Debentures ( Part - 2) | Accountancy Class 12 - Commerce
Case 2
Issue of Debentures ( Part - 2) | Accountancy Class 12 - Commerce
Issue of Debentures ( Part - 2) | Accountancy Class 12 - Commerce

Question 17:
Deepak Ltd purchased furniture of ₹2,20,000 from M/s. Furniture Mart. 50% of the amount was paid to M/s. Furniture Mart by accepting a Bill of Exchanged and for the balance the company issued 9% Debenture of ₹100 each at a premium of 10% in favour of M/s. Furniture Mart.
Pass Journal entries in the books of Deepak Ltd.
ANSWER:

Issue of Debentures ( Part - 2) | Accountancy Class 12 - Commerce
Issue of Debentures ( Part - 2) | Accountancy Class 12 - Commerce
Issue of Debentures ( Part - 2) | Accountancy Class 12 - Commerce

Question 18:
Bright Ltd. took over the assets of ₹6,60,000 and liabilities of ₹80,000 of Star Ltd. for an agreed purchase consideration of ₹6,00,000 payable 10% in cash and the balance by the issue of 12% Debentures of ₹100 each. Give necessary Journal entries in the books of Bright Ltd., assuming that:
Case (a): The debentures are issued at par.
Case (b): The debentures are issued at 20% premium.
Case (c): The debentures are issued at 10% discount.
ANSWER:
Issue of Debentures ( Part - 2) | Accountancy Class 12 - Commerce
Issue of Debentures ( Part - 2) | Accountancy Class 12 - Commerce
Issue of Debentures ( Part - 2) | Accountancy Class 12 - Commerce
Issue of Debentures ( Part - 2) | Accountancy Class 12 - Commerce

Question 19:
Star Ltd. took over the assets of ₹6,60,000 and liabilities of ₹80,000 of Moon Ltd. for ₹6,00,000. Give necessary Journal entries in the books of Star Ltd. assuming that:
Case (a): The purchase consideration was payable 10% in cash and the balance in 5,400; 12% Debentures of ₹100 each.
Case (b): The purchase consideration was payable 10% in cash and the balance in 4,500; 12% Debentures of ₹100 each issued at 20% premium.
ANSWER:

Issue of Debentures ( Part - 2) | Accountancy Class 12 - Commerce
Issue of Debentures ( Part - 2) | Accountancy Class 12 - Commerce

Question 20:
Romi Ltd. acquired assets of  ₹20 lakhs and took over creditors of  ₹2 lakhs from Kapil Enterprises.
Romi Ltd. issued 8% Debentures  of  ₹100 each at a discount of 25% as purchase consideration.
Record necessary journal entries in the books of Romi Ltd.
ANSWER:

Issue of Debentures ( Part - 2) | Accountancy Class 12 - Commerce
Issue of Debentures ( Part - 2) | Accountancy Class 12 - Commerce
Issue of Debentures ( Part - 2) | Accountancy Class 12 - Commerce

Question 21:
Romi Ltd. acquired assets of  ₹20 lakhs and took over creditors of  ₹2 lakhs from Kapil Enterprises.
Romi Ltd. issued 8% Debentures  of  ₹100 each at a discount of 10% as purchase consideration.
Record necessary journal entries in the books of Romi Ltd.
ANSWER:

Issue of Debentures ( Part - 2) | Accountancy Class 12 - Commerce
Issue of Debentures ( Part - 2) | Accountancy Class 12 - Commerce
Issue of Debentures ( Part - 2) | Accountancy Class 12 - Commerce
Question 22:
Exe Ltd. purchased the assets of the book value  ₹4,00,000 and took over the liabilities of ₹50,000 from Mohan Bros.It was agreed that the  purchase consideration ,settled at  ₹3,80,000 be paid by issuing debentures  of ₹100 each.
Pass journal entries if debenture are issued: 
(a) at par
(b) at a discount of 10% and
(c) at a premium of 10%.
It was agreed that any fraction of debentures be paid in cash.
ANSWER:
Issue of Debentures ( Part - 2) | Accountancy Class 12 - Commerce
Case 1  When Debentures are issued at Par
Issue of Debentures ( Part - 2) | Accountancy Class 12 - Commerce
Issue of Debentures ( Part - 2) | Accountancy Class 12 - Commerce
Issue of Debentures ( Part - 2) | Accountancy Class 12 - Commerce
Issue of Debentures ( Part - 2) | Accountancy Class 12 - Commerce
Issue of Debentures ( Part - 2) | Accountancy Class 12 - Commerce
Issue of Debentures ( Part - 2) | Accountancy Class 12 - Commerce

Question 23:
R Ltd. purchased the assets of S Ltd. for ₹5,00,000. It also agreed to take over the liabilities of S Ltd. amounted to ₹2,00,000 for a purchase consideration of ₹2,80,000 .
The payment of S Ltd. was made by issue of 9% Debentures of ₹100 each at par.
Pass necessary journal entries in the books of R Ltd.
ANSWER:

Issue of Debentures ( Part - 2) | Accountancy Class 12 - Commerce
Issue of Debentures ( Part - 2) | Accountancy Class 12 - Commerce

Question 24:
Green Ltd. purchased the assets of Strong Ltd. for ₹40,00,000 and took over liabilities of 7,00,000 at an agreed value of ₹32,40,000. Payment was made by issuing 10% Debentures of 100 each at a discount of 10%. Pass the necessary Journal entries in the books of Green Ltd.
ANSWER:

Issue of Debentures ( Part - 2) | Accountancy Class 12 - Commerce

Working Notes:
Number of Debentures issued= (32,40,000/90) = 36,000 debentures

Question 25:
Wellbeing Ltd. took over assets of ₹9,80,000 and liabilities of ₹40,000 of HDR Ltd. at an agreed value of ₹9,00,000. Wellbeing Ltd. paid to HDR Ltd. by issue of 9% Debentures of ₹100 each at a premium of 20%. Pass necessary Journal entries to record the above transactions in the books of Wellbeing Ltd.
ANSWER:
Issue of Debentures ( Part - 2) | Accountancy Class 12 - Commerce

Working Notes:
Number of Debentures issued = (9,00,000/120) = 7,500 debentures

Question 26:
Grown Ltd. issued 500, 10% Debentures of ₹1,000 each credited as fully paid-up to the promoters for their services to incorporate the company. It also issued 100, 10% Debentures of ₹1,000 each credited as fully paid-up to the underwriters towards their commission. Pass the Journal entries.
ANSWER:

Issue of Debentures ( Part - 2) | Accountancy Class 12 - Commerce
Issue of Debentures ( Part - 2) | Accountancy Class 12 - Commerce

Page No 9.55:
Question 27:
'Sangam Woollens Ltd.', Ludhiana, are the manufacturers and exporters of woollen garments. The company decided to distribute free of cost woollen garments to 10 villages of Lahaul and Spiti District of Himachal Pradesh. The company also decided to employ 50 young persons from these villages in its newly established factory. The company issued 40,000 Equity Shares of ₹10 each and 1,000, 9% Debentures of ₹100 each to the vendor for the purchase of machinery of ₹5,00,000. Pass necessary Journal entries.
ANSWER:

Issue of Debentures ( Part - 2) | Accountancy Class 12 - Commerce

Question 28:
Best Barcode Ltd. took a loan of  ₹5,00,000 from a bank giving  ₹6,00,000; 9% Debentures as collateral security. Pass journal entries regarding issue of debentures, if any, and show this loan in the Balance Sheet of the company.
ANSWER:

Issue of Debentures ( Part - 2) | Accountancy Class 12 - Commerce
Issue of Debentures ( Part - 2) | Accountancy Class 12 - Commerce
Issue of Debentures ( Part - 2) | Accountancy Class 12 - Commerce
Issue of Debentures ( Part - 2) | Accountancy Class 12 - Commerce
Issue of Debentures ( Part - 2) | Accountancy Class 12 - Commerce
Posting in the Company's Balance Sheet
Issue of Debentures ( Part - 2) | Accountancy Class 12 - Commerce
Issue of Debentures ( Part - 2) | Accountancy Class 12 - Commerce
Issue of Debentures ( Part - 2) | Accountancy Class 12 - Commerce
Issue of Debentures ( Part - 2) | Accountancy Class 12 - Commerce

Question 29:
A company took a loan of  ₹4,00,000 from Bandhan Bank Ltd. and issued  8% Debentures of  ₹4,00,000 as a collateral security.
ANSWER:

When Debentures Issued as Collateral Security are shown separately
Issue of Debentures ( Part - 2) | Accountancy Class 12 - Commerce
Posting in the Company's Balance Sheet (When Debentures Issued as Collateral Security are shown separately)
Issue of Debentures ( Part - 2) | Accountancy Class 12 - Commerce
Issue of Debentures ( Part - 2) | Accountancy Class 12 - Commerce
Issue of Debentures ( Part - 2) | Accountancy Class 12 - Commerce
Issue of Debentures ( Part - 2) | Accountancy Class 12 - Commerce
Alternative Method: When debentures Issued as Collateral Security are not shown separately
Issue of Debentures ( Part - 2) | Accountancy Class 12 - Commerce
(When Debentures Issued as Collateral Security are not shown separately)
Issue of Debentures ( Part - 2) | Accountancy Class 12 - Commerce
Issue of Debentures ( Part - 2) | Accountancy Class 12 - Commerce

The document Issue of Debentures ( Part - 2) | Accountancy Class 12 - Commerce is a part of the Commerce Course Accountancy Class 12.
All you need of Commerce at this link: Commerce
47 videos|171 docs|56 tests

Top Courses for Commerce

FAQs on Issue of Debentures ( Part - 2) - Accountancy Class 12 - Commerce

1. What is the process of issuing debentures?
Ans. The process of issuing debentures involves the following steps: 1. The company prepares a prospectus containing all the necessary details about the debentures, such as interest rate, redemption period, and terms and conditions. 2. The prospectus is then filed with the relevant regulatory authority for approval. 3. Once the prospectus is approved, the company advertises the debenture issue to attract potential investors. 4. Interested investors then apply for the debentures by filling out the application form and submitting it along with the required payment. 5. After the application period closes, the company allots the debentures to the investors based on their applications. 6. The company issues debenture certificates to the investors as proof of their ownership. 7. The company pays regular interest payments to the debenture holders until the redemption period, at which point the principal amount is repaid.
2. What are the advantages of issuing debentures for a company?
Ans. There are several advantages of issuing debentures for a company: 1. Source of long-term funds: Debentures provide a company with a long-term source of funds, allowing it to finance its operations and investments. 2. Lower cost of capital: Debentures often have a lower cost of capital compared to equity shares, as interest payments are tax-deductible expenses for the company. 3. Control retention: Unlike equity shareholders, debenture holders do not have voting rights, allowing the company to retain control over its decision-making process. 4. Flexible repayment terms: Companies have the flexibility to structure debentures with different redemption periods and interest rates to suit their financial needs. 5. Improved credit rating: Issuing debentures and making regular interest payments can help improve a company's credit rating, making it easier to borrow funds in the future.
3. What are the risks associated with investing in debentures?
Ans. Investing in debentures comes with certain risks, including: 1. Default risk: There is a risk that the company issuing the debentures may default on interest payments or fail to repay the principal amount at maturity. 2. Interest rate risk: Debenture holders are exposed to interest rate risk, as changes in market interest rates can impact the value of the debentures. 3. Liquidity risk: Debentures may have limited liquidity, meaning it may be difficult to sell them quickly in the secondary market. 4. Redemption risk: If the debentures have a long redemption period, there is a risk that the company may not have sufficient funds to repay the principal amount at maturity. 5. Subordination risk: In case of liquidation, debenture holders are typically paid after other senior creditors, such as bondholders and secured lenders, increasing the risk of not receiving full repayment.
4. Can debentures be converted into equity shares?
Ans. Yes, debentures can be convertible into equity shares based on the terms and conditions specified at the time of issuance. Convertible debentures provide the debenture holders with an option to convert their debentures into a specified number of equity shares within a predetermined period. This conversion is usually at a pre-determined conversion ratio or price. By converting debentures into equity shares, debenture holders become shareholders of the company and can participate in the company's profits and decision-making process.
5. What is the role of a debenture trustee?
Ans. A debenture trustee is appointed by the company issuing the debentures to protect the interests of the debenture holders. The role of a debenture trustee includes: 1. Safeguarding debenture holders' interests: The trustee acts as a custodian of the debenture holders' interests, ensuring that the company fulfills its obligations to make interest payments and repay the principal amount. 2. Monitoring compliance: The trustee monitors the company's compliance with the terms and conditions specified in the debenture trust deed, such as timely payment of interest and adherence to redemption terms. 3. Representing debenture holders: The trustee represents the collective interests of the debenture holders and can take necessary legal action on their behalf in case of any defaults or breaches by the company. 4. Enforcing security: If the debentures are secured by specific assets, the trustee ensures that the company maintains and preserves the security provided, protecting the interests of the debenture holders. 5. Providing information: The trustee provides regular updates and information to the debenture holders regarding the company's financial performance, compliance, and any material events that may affect their investment.
47 videos|171 docs|56 tests
Download as PDF
Explore Courses for Commerce exam

Top Courses for Commerce

Signup for Free!
Signup to see your scores go up within 7 days! Learn & Practice with 1000+ FREE Notes, Videos & Tests.
10M+ students study on EduRev
Related Searches

Previous Year Questions with Solutions

,

practice quizzes

,

Viva Questions

,

video lectures

,

shortcuts and tricks

,

ppt

,

Summary

,

Issue of Debentures ( Part - 2) | Accountancy Class 12 - Commerce

,

Important questions

,

Issue of Debentures ( Part - 2) | Accountancy Class 12 - Commerce

,

Objective type Questions

,

pdf

,

Exam

,

study material

,

MCQs

,

Free

,

Issue of Debentures ( Part - 2) | Accountancy Class 12 - Commerce

,

Sample Paper

,

mock tests for examination

,

Semester Notes

,

past year papers

,

Extra Questions

;