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Question
No debenture redemption reserve is required for debentures issued by ______.
Options
manufacturing companies
infrastructure companies
banking companies
trading companies
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Solution
No debenture redemption reserve is required for debentures issued by banking companies.
Explanation:
Banking companies are not required to create a debenture redemption reserve because they are already strictly regulated by the Reserve Bank of India and follow special financial norms, reducing the risk to debenture holders.
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RELATED QUESTIONS
Pass the necessary journal entries for the issue and redemption of Debentures in the following cases:
(i) 15,000, 9% Debentures of Rs 250 each issued at 5% premium, repayable at 15% premium.
(ii) 2,00,000, 12% Debentures of Rs 10 each issued at 8% premium, repayable at par.
Star Ltd. is a manufacturer of chemical fertilisers. Its annual turnover is ₹ 50 crores. The company had issued 5,000, 12% Debentures of ₹ 500 each at par. Calculate the amount of Debentures Redemption Reserve which needs to be created to meet the requirements of law.
Dow Ltd. issued ₹ 2,00,000; 8% Debentures of ₹ 10 each at a premium of 8% on 30th June, 2016 redeemable on 31st March, 2018. How much amount should be transferred to Debentures Redemption Reserve before redemption of debentures?
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| On 31st March, 2018, W Ltd. had the following balances in its books: | ₹ |
| 9% Debentures | 6,00,000 |
| Debentures Redemption Reserve | 50,000 |
| Surplus,i.e., Balance in Statement of Profit and Loss | 3,00,000 |
On that date, the company decided to transfer ₹ 1,00,000 to Debentures Redemption Reserve. It also decided to redeem debentures of ₹ 3,00,000 on 30th June, 2018.
Pass necessary Journal entries in the books of the company.
India Textiles Corporation Ltd. has outstanding ₹ 50,00,000; 9% Debentures of ₹ 100 each due for redemption on 31st July, 2019. Pass Journal entries for redemption assuming that there is a balance of ₹ 3,00,000 in Debentures Redemption Reserve on the date of redemption.
Godrej Ltd. has 20,000; 7% Debentures of ₹ 100 each due for redemption on 31st August, 2018. There is a balance of ₹ 3,50,000 in Debentures Redemption Reserve Account as on 31st March, 2016. Investment, as required by the Companies Act, 2013 is made on 1st April, 2017 in fixed deposit bearing interest @ 6% p.a. Bank deducted TDS @ 10% on its maturity which is 31st March, 2018.
Pass Journal entries for redemption of debentures.
Apollo Ltd.issued 21,000; 8% Debentures of ₹ 100 each on 1st April, 2013 redeemable at a premium of 8% on 30th June, 2019. The company decided to transfer the required amount to Debentures Redemption Reserve in three equal annual instalments starting with 31st March, 2017. Required investment was made in Government Securities on 30th April, 2019. Ignore interest on debentures and also investment.
Pass necessary Journal entries regarding issue, transfer to DRR, investment, and redemption of debentures.
Mahima Ltd.issued ₹ 38,00,000, 9% Debentures of ₹ 100 each on 1st April, 2013. The debentures were redeemable at a premium of 5% on 30th June, 2015. The company transferred an amount of ₹ 9,50,000 to Debentures Redemption Reserve on 31st March, 2015. Investments as required by law were made in fixed deposit of a bank on 1st April, 2015.
Ignoring interest on fixed deposit ,pass necessary journal entries starting from 31st March, 2015 regarding redemption of debentures .
On 1st April, 2013 the following balances appeared in the books of Blue and Green Ltd.:
12%Debentures (Redeemable on 31st August, 2015)
₹ 20,00,000
Debentures Redemption Reserve ₹ 2,00,000.
The company met the requirements of Companies Act, 2013 regarding Debentures Redemption Reserve and Debentures Redemption Investments and redeemed the debentures.
Ignoring interest on investments, pass necessary journal entries for the above transactions in the books of company.
Tata Motors Ltd. issued 40,000;7% Debentures of ₹ 100 each on 1st July,2009 redeemable at premium of 5% as under:
On 31st March,2015 16,000 Debentures
On 31st March,2016 16,000 Debentures
On 31st March,2017 8,000 Debentures
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 .
'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:
| Year | III | IV | V | VI |
| Amount (₹) | 10,00,000 | 20,00,000 | 30,00,000 | 40,00,000 |
Prepare 9% Debenture Account form 1st April, 2008 till all the debentures were redeemed.
Choose the appropriate alternative from the given options:
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What is the maximum amount of debentures which an unlisted company, other than a NBFC and HFC, can redeem out of its capital?
Jerome Ltd., an unlisted manufacturing company, had 20,000, 6% Debentures of ₹100 each due for redemption at par on 31st March, 2022. On this date the company had the required amount of ₹ 2,00,000 in its Debenture Redemption Reserve.
The Debenture Redemption Investment which was purchased on 30th April, 2021, was realised at 98% on the date of redemption and the debentures were redeemed on the due date.
You are required to pass journal entries in the books of the company for the year 2021-22. (Ignore interest on debentures).
On 1st April, 2022, the following balances appeared in the books of Alpha Pvt. Ltd.
| 9% Debentures redeemable on 31st March, 2023, at a premium of 2% | ₹ 50,00,000 |
| Debenture Redemption Reserve | ₹ 5,00,000 |
The Debenture Redemption Investment, which was purchased by the company on 1st April, 2022, was realised at 101% on the date of redemption and the debentures were redeemed on the due date.
You are required to prepare the following accounts for the year 2022-23 in the books of Alpha Pvt. Ltd.
- Debenture holders’ Account.
- Debenture Redemption Investment Account.
