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No. 1 in CA / CS education

Q.1 :-

On 1-10-06 X ltd issued 10,000, 12% Debentures of Rs 100 each .Interest payable on 30th
September & 31st March every year.
Company purchases the following own debenture for immediate cancellation:
31st Aug 2007
31st Dec 2008

1000 Debentures @ Rs 98/- ex interest


500 Debentures @ Rs 97/- cum interest

Journalize till 31-03-2009?


Q.2 :-

In the above example assume the debentures are purchased to hold them till cancellation (i.e.
own debentures). All above own debentures are to be cancelled on 31-03-09. Journalize till 3103-09?

Q. 3 :- In the books of X ltd 12% Debentures account showed a credit balance of Rs 2,00,000/- on 01-04
-2000 (Face Value @ Rs 100).
During the year company purchases debentures as follows:
On 1-8-00

200 Own Debentures @ Rs 95/- (ex interest)

On 1-11-00

200 own Debentures @ Rs 98/- (cum interest)

The debentures thus purchased were retained by the company. Interest payable on 30th
September & on 31st March every year.
Q.4 :-

(1) Swati Associates Ltd. has issued 10,000 12% Debentures of Rs 100 each on 1-1-2010.
These Debentures are redeemable after 3 years at a premium of Rs 5 per debenture.
Interest is payable annually.
(2) On October 1, 2011, It buys 1,500 Debentures from the market at Rs 98 per debenture
These are sold away on June 30,2012 at Rs 105 per debenture.
(3) On January 1, 2012, it buys 1,000 debentures at Rs 104 per debenture from the open
market. These are cancelled on April 1, 2012.
(4) On October 1, 2012 it buys 2,000 debenture at Rs 106 per Debenture from the open market
These debentures along with other debentures are redeemed on 31st December, 2012.
Prepare the relevant Ledger Accounts showing the above transaction. Workings should from
part of your answer.

Q.5:-

A Company Issued 5,000 14% Debenture of Rs 100 each at Par on 1st April, 1984 redeemable at
par on 31st March. 1998. A Sinking Fund was established for the purpose. It was expected that
investment would earn 10 per cent net. Sinking Fund tables show that Re. 0.1638 amounts to
Re. 1 at the end of five years @ 10%. On 31st March , 1989 the investment realised Rs 3,90,000.
On that day the companys bank balance stood at Rs. 1,45,600. The Debentures were duly
redeemed. Give the necessary ledger accounts.

Redemption of Debentures

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No. 1 in CA / CS education

Q. 6:-

The following balances appeared in the books of X ltd on 1-1-01:


6% Debentures of Rs 100 each

Rs 2,00,000

Sinking Fund Account

Rs 1,00,000

Sinking Fund Investment represented by :


Own Debentures Face Value Rs 50,000/-

@ 90/-

The remaining amount is invested in 6% Government Securities (Face Value Rs 60000)


On 1-5-01 company sold the government securities (Face Value Rs 20000) @ Rs
95/- ex interest. & the proceeds realized will apply in purchasing of 200 own debentures. Due
date of interest 30th June / 31st December.
Jounalize?
Q.7:-

The following balances appeared in the books of X Ltd. as on 1st Jan 20X1:
12% Debentures of Rs 100 each
Rs
1,.00,000
Debenture Redemption Fund
Rs
36,000
Debenture Redemption Fund Investment Account
Rs
36,000
(represents 12% Govt. securities of the Face Value of Rs 45,000)
On 1.5.20X1 the company purchased 200 own Debentures in the market at Rs 97 cuminterest out of funds raised by selling 12% Govt. securities of the face value of Rs 22,500.
Interest on Debenture is payable on 30th June and 31st Dec. and interest on 12% Govt.
Securities is receivable on the same dates.
Required: Give the necessary journal entries, assuming (a) that the own debentures purchased
were cancelled immediately and (b) that the own debentures purchased were retained as part
of Debenture Redemption Fund Investments till 31.12.20X1 on which date they were cancelled.

Q.8:-

Progressive Ltd. issued Rs 10,00,000, 6% Debenture Stock at par on 21.1.2009 Interest was
payable on 30th June and 31st December, in each year.
Under the terms of the Debenture Trust the owned stock is redeemable at par.
The trust deed obliges the Company to pay to the trustees on 31st December, 2010 and annually
thereafter the sum of Rs 1,00,000, to be utilized for the redemption and cancellation of an
equivalent amount of stock, which is to be selected by drawing lots.
Alternatively, the Company is empowered as from 1st January, 2010 to purchase its own
debentures on the open market. These Debentures must be surrendered to the Trustees for
Cancellation and any adjustments of accrued interest recorded in the books of account. If in any
year the nominal amount of the stock surrendered under this alternative does not amount to Rs
1,00,000 then the shortfall is to be paid by the Company to the Trustees in cash on 31st
December. The following purchased of stock were made by the Company:

Redemption of Debentures

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No. 1 in CA / CS education

Nominal value of
Stock purchased
Rs
(1)30th September 2010
(2)31st May 2011
(3)31st July 2012

1,20,000
75,000
1,15,000

Purchase price per


Rs 100 of stock
Rs
98
95 (Ex-interest)
92

The Company fulfilled all its obligation under the trust deed.
Required: Prepare the following Ledger Accounts: (a) Debenture Stock A/c, (b) Debenture
Redemption A/c, (c) Debenture Interest A/c.
NOTE: Ignore costs and taxation.
Q.9:-

Hindustan Ltd., issued 50,000 6% Debenture of 100 each 1st January, 2009. The debentures are
redeemable by the creation of a Debenture Redemption Reserve. The company had right to call
upon the Trustee to apply the Debenture Redemption Reserve monies in purchasing own
debentures, if available blow par. The following information is given:
(a) The annual appropriation is Rs 50,000.
(b) Debenture Redemption Reserve Balance as on 1st January 2012 was Rs 1,31,942
represented by 6% State Lone at cost of Rs 74,262 (face value Rs 80,000) and Debenture
Redemption Reserve case Rs 56,830. This case balance which includes the annual appropriation
of Rs 50,000 was invested in 6% State Lone bond, Purchased Cum interest, had a face value of Rs
60,000.
(c) 1st September, 2012 sold the State Lone of the face value Rs 40,000 out of lone held on !st
January, 2012 Rs 38,000 (ex-interest) and the proceeds were applied in purchasing own
debenture (face Value Rs 45,000 ex- interest).
(d) The debenture purchased are cancelled on 31st December.
(e) Interest on State Lone is received on 31st March and 30th September.
(f) Interest on debentures is paid on 30th June and 31st December.
(g) Debentures outstanding as on 1st January 2012 were Rs 4,67,000.
Make ledger entries in the books of the company to give effect to the above.

Redemption of Debentures

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