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Question
What is meant by an ‘Irredeemable Debenture’?
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Solution
Irredeemable Debentures are those debentures that are not repayable or redeemable by a company during its lifetime. These debentures can only be repaid when the company is being wound up. These are also known as Perpetual Debentures, which means they are debentures with an indefinite life. In India, nowadays, no company can issue irredeemable debentures.
RELATED QUESTIONS
State the meaning of ‘Debentures issued as Collateral Security’.
What is meant by ‘Issue of debenture at discount and redeemable at premium’?
Journalise the following:
(i) A debenture issued at Rs. 95, repayable at Rs. 100;
(ii) A debenture issued at Rs. 95, repayable at Rs. 105; and
(iii) A debenture issued at Rs. 100, repayable at Rs. 105;
The face value of the debenture in each of the above cases is Rs. 100.
A. Ltd. issued 50,00,000, 8% Debentures of Rs 100 at a discount of 6% on April 01, 2009, redeemable at a premium of 4% by draw of lots as under:
20,00,000 Debentures on March, 2011
10,00,000 Debentures on March 2013
20,00,000 Debentures on March 2014
Compute the amount of discount to be written off in each year till debentures are paid. Also prepare the discount/loss on the issue of the debenture account.
A Ltd . issued 2,000; 9% Debentures of ₹ 100 each on the following terms:
₹20 on applications ;₹ 20 on allotment ; ₹ 30 on first call ; ₹ 30 on final call.
The public applied for 2,400 debentures. Applications for 1,800 debentures were accepted in full. Applications for 400 debentures were allotted 200 debentures and applications for 200 debentures were rejected . Pass necessary Journal entries .
ABC Ltd. issued 40,000; 10% Debentures of ₹ 100 each at par for cash payable in full along with the application. Applications were received for 60,000 debentures . Debentures were allotted and excess application money was refunded. Pass Journal entries in the books of the company.
Nipa Limited issued 10,000 Debentures of ₹ 100 each at a premium of 10%, payable 30% of nominal (facе) value on application (including premium) and the balance on allotment. The debentures were applied for and the amount was duly received.
You are required to give Journal entries and prepare Cash Book.
Alok Ltd. issued 7,000, 10% Debentures of ₹ 500 each at a premium of ₹ 50 per debenture redeemable at a premium of 10% after 5 years. According to the terms of issue, ₹ 200 was payable on application and balance on allotment.
Record necessary Journal entries at the time of issue of 10% Debentures.
Iron Products Ltd. issued 5,000; 9% Debentures of ₹ 100 each at a premium of ₹ 40 payable as follows;
(i) ₹ 40 , including premium of ₹ 10 on applications;
(ii) ₹ 45, including premium of ₹ 15 on allotment ; and
(iii) Balance as first and final call.
The issue was subscribed and allotment made. Calls were made and due amount was received .
Pass Journal entries .
X Ltd . issued 12,000; 8% Debentures of ₹ 100 each at a discount of 5% payable as 25% on application;20% on allotment and balance after three months.
Pass Journal entries.
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 exchange and for the balance, the company issued 9% debentures of ₹ 100 each at a premium of 10% in favor of M/s. Furniture Mart.
Pass Journal entries in the books of Deepak Ltd.
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 premium of 25% as purchase consideration.
Record necessary journal entries in the books of Romi Ltd.
Green Ltd. purchased the assets of Strong Ltd. for ₹ 40,00,000 and took over liabilities of ₹ 7,00,000 for ₹ 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.
Bright Ltd. issued 5,000; 10% Debentures of ₹ 100 each on 1st April, 2015 . The issue was fully subscribed . According to the terms of issue, interest on the debentures is payable half-yearly on 30th September and 31st March and the tax deducted at source is 10%.
Pass necessary journal entries related to the debenture interest for the year ending 31st March , 2016 and transfer of interest on debentures of the year to the Statement of Profit and Loss .
On 1st April, 2025, V.V.L. Ltd. issued 1,000, 9% Debentures of ₹ 100 each at a discount of 6%, redeemable at a premium of 10% after three years. Pass necessary Journal entries for the issue of debentures and debenture interest for the year ended 31st March, 2026, if interest is payable on 30th September and 31st March. The company closes its books on 31st March every year.
[Hint: Amount received as Debentures Application and Allotment A/c = 1,000 × ₹ 94 = ₹ 94,000. Interest on 1,000 Debentures of ₹ 100 each for 6 months = ₹ 1,00,000 × 9/100 x 6/12 = ₹ 4,500.]
Office Products Ltd, issued on 1st April, 2018, 20,000, 9% Debentures of ₹ 100 each at a premium of 10% redeemable at a premium of 5% after 5 years. Issue price was payable along with application. Pass the necessary Journal entries.
Fill in the blank.
For recording the issue of debentures as collateral security by a journal entry _______ account is debited.
X Co. Ltd. purchased assets worth Rs.28,80,000. It issued debentures of Rs. 100 each at a discount of 4 per cent in full satisfaction of the purchase consideration. The number of debentures issued to vendor is ______.
Which of the following given statement is correct.
Statement 1 - "Shares cannot be converted into debentures whereas debentures can be converted into shares"
Statement 2 - "Shares can be converted into debentures whereas debentures cannot be converted into shares"
The debentures are issued with a specified rate of interest, which is called the coupon rate are known as which types of debentures?
Which of the following. column indicated in·the statement given below is to be credited?
"Writing off the loss on issue of debentures"
The loss on issue of Debentures is written-off from ______.
Loss on issue of debentures is treated as ______.
A Ltd. took over the assets of ₹ 6,60,000 and liabilities of ₹ 80,000 of B Ltd. for an agreed purchase consideration of ₹ 6,00,000 payable 10% in cash and the balance by the issue of 15% debentures of ₹ 100 each at 10% discount. The number of debentures to be issued is:
Interest on debentures is calculated on ______.
MK Ltd. has outstanding Rs. 30,000 11% debentures of Rs. 100 each redeemable at 10% premium as follows:
| March 31, 2018 - | 10,000 debentures |
| March 31, 2019 - | 12,000 debentures |
| March 31, 2020 - | Remaining debentures |
Pass necessary journal entries in the books of the company.
