D. K. Goel solutions for Accountancy Volume 1 and 2 [English] Class 12 ISC chapter 7 - Company Accounts - Issue of Debentures [Latest edition]

What is a Debenture?

Discuss the different types of debentures.

What is meant by ‘Mortgage Debentures’?

What does a Bearer Debenture mean?

What is ‘Registered Debenture’?

What is meant by ‘Redeemable Debenture’?

What is meant by an ‘Irredeemable Debenture’?

Distinguish between redeemable debentures and irredeemable debentures.

What is a ‘Convertible Debenture’?

State the meaning of fully convertible debentures.

State the meaning of partly convertible debentures.

Distinguish Between Equity Shares and Preference Shares.

What is the nature of debenture interest?

What is meant by ‘debentures issued at par but redeemable at premium’?

What is meant by ‘Issue of debenture at discount and redeemable at premium’?

What is Zero Coupon Bond?

Mention two differences between ‘Premium on Issue of Debentures’ and ‘Premium on Redemption of Debentures’.

Why is premium on the issue of debentures considered a capital profit?

Interest on debentures has to be paid even if the company is not earning a profit. Justify.

State two differences between Share Capital and Loan Capital.

What is meant by issue of debentures as purchase consideration?

When does Loss on Issue of Debentures arise?

What is the nature of loss on Issue of Debentures?

What is the accounting treatment of ‘Loss on Issue of Debentures’?

Give the meaning of ‘Issue of Debentures as a collateral security.’

What is the accounting treatment when debentures are issued as a collateral security?

Give the adjusting entry and closing entry for interest on debentures due to the debenture holders of a company.

‘A Company has to pay interest on debentures prior to paying dividend on shares.’ Justify.

On 1st April, 2021, Bhim Ltd. issued 2,000, 5% Debentures of ₹ 100 each as follows:

The interest on these debentures was to be paid annually on 31st March, every year, by the company.

You are required to calculate interest on these debentures payable by the company on 31st March, 2022.

On 1st April, 2023, Zara Ltd. issued 10,000, 6% Debentures of ₹ 100 each at a discount of 5%. On 31st March, 2024, the company had ₹ 40,000 in its Capital Reserve A/c and ₹ 30,000 as balance of Securities Premium.

Give the journal entry to write off the discount on the issue of debentures on 31st March, 2024.

X Ltd. issued 2,000, 15% debentures of ₹ 100 each at Par, payable as follows: ₹ 25 on Application; ₹ 25 on Allotment and ₹ 50 on First and Final Call. 

Applications were received for 3,000 debentures. Applications for 1,600 debentures were accepted in full. Applications for 600 debentures were allotted 400 debentures and the rest were rejected. All moneys due were received.

Pass necessary journal entries.

X Ltd. issued 5,000, 12% Debentures of ₹ 100 each at a premium of ₹ 5 payable as follows:

Applications were received for 6,000 debentures, and allotment was made pro rata to all applicants. All the moneys were duly received. Pass necessary journal entries.

R Ltd. issued 8,000, 13% Debentures of ₹ 100 each at a discount of 5% payable as follows:

Public applied for 6,000 debentures. All the moneys were duly received. Expenses on issue of debentures amounted to ₹ 20,000.

Pass journal entries and show the above accounts in the Company’s Balance Sheet at the end of the first year. Company decided to write off the discount on issue of debentures in the first year itself.

Star Cosmetics Ltd. issued 20,000, 9% Debentures of ₹ 100 each payable as follows:

All the debentures were subscribed and allotted and the amount was duly received except the allotment and first and final call money on 500 debentures. Articles of Association of the Company provided for charging interest on Calls-in-Arrears @ 8% p.a. 

Pass journal entries, prepare Calls-in-Arrears Account and show the debentures in the Balance Sheet of the Company as at 31st March, 2025.

Dev Ltd. issued 25,000, 8% Debentures of ₹ 100 each at a discount of 5% payable as follows:

All the debentures were subscribed and allotted.

Astha, to whom 400 debentures were allotted, paid the amounts of first and second and final calls on 31st March, 2025. As per Articles of Association of the Company, interest on Calls in Arrears is to be charged @ 9% per annum, which Astha paid on 31st March, 2025.

You are required to pass journal entries in respect of interest on Calls-in-Arrears.

Agni Ltd. issued 10,000, 8% Debentures of ₹ 100 each payable as follows:

All the debentures were subscribed and allotted.

Debentureholder ‘A’, who was allotted 300 debentures, paid the amount of first and second & final calls with allotment. Another debenture holder, ‘B’, did not pay the first call on his 600 debentures, which he paid along with second & final call. 

As per Articles of Association, interest on calls-in-advance is to be allowed @ 10% p.a. whereas interest on calls-in-arrears is to be charged @ 8% p.a. 

Pass journal entries.

Nupur Ltd. took over Plant and Machinery worth ₹ 8,00,000, Stock worth ₹ 7,00,000 and Sundry Debtors for ₹ 6,00,000 from Vandna Ltd. for a purchase consideration of ₹ 22,80,000. Nupur Ltd. paid the purchase consideration by issuing 8% Debentures of ₹ 200 each. Pass entries in the books of Nupur Ltd. when:

1. Debentures were issued at 5% discount.
2. Debentures were issued at 20% premium.

Golden Ltd. bought assets for ₹ 5,50,00,000 and assumed liabilities worth ₹ 1,26,00,000 from Silver Ltd. and issued 8% Debentures of ₹ 500 each at a premium of 6%. Record necessary entries in the books of Golden Ltd.

Disha Ltd. took over assets of ₹ 8,00,000 and liabilities of ₹ 3,00,000 from Kirti Ltd. for a purchase consideration of ₹ 6,00,000. The payment was made by issue of 9% Debentures of ₹ 100 each at 20% premium. 

Pass the necessary journal entries for the above transactions in the books of Disha Ltd.

A Company purchased Assets of the book value of ₹ 12,00,000 and Liabilities of ₹ 2,20,000 of another Company for a purchase consideration of  ₹9,40,000. The purchase consideration was discharged by the issue of debentures of ₹ 500 each at a discount of 6%. Pass journal entries in the books of purchasing company. It is the policy of the Company to write off all capital losses in the first year itself.

Moon Craft Ltd. purchased machinery for ₹ 2,70,000. As per the agreement, the payment is to be made by issuing sufficient number of 5% Debentures of ₹ 100 each. 

You are required to calculate number of debentures to be issued & pass the necessary journal entries in the books of the Company if the said Debentures are issued:

1. At a discount of 10%.
2. At a premium of 20%.

Discount on issue is to be written off in the very first year.

J Ltd. purchased machinery for ₹ 3,50,000 from K Ltd. on 28.2.2023. ₹ 50,000 were paid to K Ltd. immediately and the balance was paid by issue of 10% debentures of ₹ 3,10,000 in J Ltd. Pass the necessary journal entries including writing off discount on issue of debentures.

X Ltd. took over assets of ₹ 5,00,000 and liabilities of ₹ 1,00,000 of another company at an agreed price of ₹ 3,80,000. The purchase consideration was discharged by issuing debentures of ₹ 100 each at a discount of 10%. It was agreed that any fraction of the debenture be paid in cash. Give journal entries in the books of X Ltd.

Star Textiles Ltd. purchased assets of Modem Textiles Ltd. as under:

Land and Buildings of ₹ 25,00,000 at ₹ 40,00,000; Plant and Machinery of ₹ 10,00,000 for ₹ 7,50,000 and Furniture of ₹ 3,00,000 for ₹ 1,00,000 for purchase consideration of ₹ 45,00,000. Star Textiles Ltd. paid ₹ 3,00,000 in cash and remaining by issue of 9% Debentures of ₹ 500 each at a premium of 5%. Record necessary entries in the books of Star Textiles Ltd.

Gunjan Limited purchased a running business from Vrindavan Limited for a sum of ₹ 25,00,000, payable ₹ 4,00,000 by cheque and for the balance issued 8% Debentures of ₹ 100 each at 5% premium.

The assets and liabilities consisted of the following:

Record necessary journal entries in the books of Gunjan Limited.

X Ltd. had ₹ 25,00,000, 11% Debentures outstanding as on 1st April, 2024. During the year, it took a loan of ₹ 5,00,000 from Punjab National Bank for which the Company placed, with the bank, debentures for ₹ 6,00,000 as Collateral Security. Pass journal entries, if any. Also show how the Debentures and Bank Loan will appear in the Company’s Balance Sheet as at 31st March, 2025.

Hassan Limited took a loan of ₹30,00,000 from a bank against primary security worth ₹40,00,000 and issued 35,000, 6% debentures of ₹100 each as collateral security. The company again, after one year, took a loan of ₹50,00,000 from bank against Plant as primary security and deposited ₹60,000, 6% debentures of ₹100 each as collateral security. Record necessary journal entries. How will you show the issue of debentures and bank loan in the balance sheet of the company?

India Ltd. made the following issue of 6% debentures:

1. For cash at 90%, 6,000 debentures of ₹ 100 each.
2. 1,100 debentures of ₹ 100 each to a creditor regarding machinery costing ₹ 1,00,000.
3. To bank for a loan of ₹ 7,00,000 as collateral security, 10,000 debentures of ₹ 100 each.

Prepare necessary entries, ignoring writing off discount on issue of debentures.

X Ltd. issued 25,000, 9% Debentures of ₹ 100 each at a premium of ₹ 4 per debenture on 1st April, 2024. On the same date, it purchased assets of ₹ 10,00,000 and took over liabilities of ₹ 70,000 of Y Ltd. and paid ₹ 4,00,000 in Cash and remaining by issue of ₹ 5,00,000, 9% debentures at a premium of 6%. On the same date, it took a loan from the Bank for ₹ 6,00,000 and issued 9% debentures as collateral security. Give entries and the extract of balance sheet on 31st March, 2025. Ignore interest.

Usha Ltd. issued 30,000, 10% Debentures of ₹ 100 each as collateral security for a loan of ₹ 24,00,000 from Axis Bank. The company was unable to repay the loan on which interest payable was ₹ 6,00,000 as on 31st March, 2025.

 Axis Bank, on 31st March, 2025, exercised the right vested in it by way of debentures being issued as collateral Security.

Pass Journal entries in the books of Usha Ltd. on 31st March, 2025.

What journal entries will be made in the following cases:

1. A company issued ₹ 40,000 12% Debentures at par, redeemable also at par.
2. A company issued ₹ 40,000 12% Debentures at a discount of 10% redeemable at par.
3. A company issued ₹ 40,000, 12% Debentures at a premium of 5% redeemable at par.
4. A company issued ₹ 40,000, 12% Debentures at par, redeemable at a 10% premium.
5. A company issued ₹ 40,000 12% Debentures at a discount of 5% and redeemable at a 5% premium.

Note: The face value of a 12% Debenture is ₹ 100. Assume that the discount or loss on issue of debentures is to be written off in the first year itself.

Journalise the transactions given below:

1. A debenture issued at ₹ 95, repayable at ₹ 100.
2. A debenture issued at ₹ 95, repayable at ₹ 105.
3. A debenture issued at ₹ 100, repayable at ₹ 105.
4. A debenture issued at ₹ 105, repayable at ₹ 100.

   The face value of debenture in each of the above cases is ₹ 100.

On 1-4-2024, K.K. Ltd. issued 500, 9% Debentures of ₹ 500 each at a discount of 4%, redeemable at a premium of 5% after three years. 

Pass necessary Journal Entries for the year ended 31-3-2025, assuming that interest is payable on 30th September and 31st March and the rate of tax deducted at source is 10%. The company closes its books on 31st March every year.

On 1st April, 2024, Luxury Cosmetics Ltd. issued 30,000, 9% debentures of ₹ 500 each at a discount of 4%, redeemable at a premium of 5% after 4 years, payable as ₹ 200 on application and balance on allotment. Record necessary entries for issue of debentures. Luxury cosmetics has a balance of ₹ 20,00,000 in Securities Premium.

X Ltd. issued on 1st April, 2024, 50,000, 7% Debentures of ₹ 100 each at a 4% discount redeemable after five years at a premium of ₹ 10. All the debentures were subscribed. During the year ended 31st March, 2025, the company earned a profit of ₹ 1,20,000. It has a balance of ₹ 5,50,000 in Securities Premium.

Pass the Journal entries and prepare an extract of Balance Sheet as of 31st March, 2025 showing Loss on Issue of Debentures.

X Ltd. issued 5,000, 8% Debentures of ₹ 200 each at a premium of 6%, redeemable at a premium of 5% after 5 years. According to the terms of issue, ₹ 80 was payable on application and balance on allotment.

Record necessary Journal entries for issue of Debentures.

Suvidha Ltd. purchased machinery for ₹ 1,98,000 from Suppliers Ltd. The payment was made by issue of 12% debentures of ₹ 100 each. Pass necessary journal entries for the purchase of machinery and issue of debentures when:

1. Debentures are issued at par.
2. Debentures are issued at a 10% discount.
3. Debentures are issued at a 10% premium.

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. 

Vayee Ltd. purchased the following assets of E.X. Ltd.:

Land and Building of ₹ 60,00,000 at ₹ 84,00,000; Plant and Machinery of ₹ 40,00,000 at ₹ 36,00,000.

The purchase consideration was ₹ 1,10,00,000. Payment was made by accepting a Bill of Exchange in favour of E.X. Ltd. of ₹ 20,00,000 and remaining by issue of 8% debentures of ₹ 100 each at a premium of 20%.

Record the necessary journal entries for the above transactions in the books of Vayee Ltd.

Tushar Ltd. purchased assets of ₹ 14,40,000 and liabilities of ₹ 2,55,000 from Chander Ltd. on 1.4.2025. ₹ 2,40,000 were paid immediately. Pass journal entries in the books of Tushar Ltd. if the balance was paid as follows:

Case (i) by issue of ₹ 9,00,000, 11 % debentures in Tushar Ltd. 

Case (ii) by issue of ₹ 10,50,000, 12% debentures in Tushar Ltd.

A Company purchased assets of the book value of ₹ 6,00,000 and took over liabilities of ₹ 1,50,000 from Golden Ltd. It was agreed that the purchase consideration, settled at ₹ 4,80,000, be paid by issuing debentures of ₹ 100 each at a premium of 10%. It was further agreed that any fraction of the debenture be paid in cash. Give journal entries in the books of the purchasing company.

Oberoi Ltd. took certain fixed assets for ₹ 6,30,000 from Vikram Ltd. and allotted 6,000, 12% Debentures at a premium of 5% to satisfy the purchase consideration. The Company then issued a prospectus inviting the public to subscribe to ₹ 20,000, 11% Debentures of ₹ 100 each at a discount of 2%, payable as ₹ 35 on application, ₹ 23 on allotment and the balance on first and final call. 

    Applications were received for 16,000 debentures only. All the applications were accepted and money received except first and final call on 100 debentures. Prepare the Cash Book and the Journal.

X Ltd. raised a bank loan of ₹ 10,00,000 and issued by way of collateral security 10,000, 12% Debentures of ₹ 100 each. The Company further issued to public 15,000, 12% Debentures of ₹ 100 each at a 2% discount, payable ₹ 30 on application, ₹18 on allotment, ₹ 20 on first call and the balance a month later. The public applied for 20,000 debentures. Applications for 12,000 debentures were accepted in full, applications for 4,000 debentures were allotted 3,000 debentures and the remaining applications were rejected. All amounts were duly received. Prepare journal entries and show the Balance Sheet.

A company issues the following debentures:

1. 10,000, 12% debentures of ₹ 100 each at par but redeemable at a premium of 5% after 5 years;
2. 10,000, 12% debentures of ₹ 100 each at a discount of 5%, but redeemable at a premium of 5% after 5 years;
3. 5,000, 12% debentures of ₹ 100 each at a premium of 10% but redeemable at par after 5 years;
4. 1,000, 14% debentures of ₹ 100 each issued to a supplier of machinery costing ₹ 95,000, the debentures are repayable after 5 years; and
5. 300, 13% debentures of ₹ 100 each as a collateral security to a bank who has advanced a loan of ₹ 25,000 to the company for a period of 5 years. 

Pass the Journal entries to record the issue of debentures.

Show by means of journal entries how would you record the following issues. Also show how they would appear in the respective balance sheets.

1. A Ltd. issues ₹ 5,00,000, 13% debentures at a discount of 8% redeemable at par.
2. B Ltd. issues ₹ 6,00,000, 12% debentures at a discount of 6% redeemable at a premium of 7%.
3. C Ltd. purchased plant and machinery for ₹ 8,00,000, payable as to ₹ 2,30,000 in cash and the balance by an issue of 10% debentures of ₹ 100 each at a discount of 5%.
4. D Ltd. issued 500 11% debentures of ₹ 100 each as a collateral security to a bank who has advanced a loan of ₹ 45,000 to the company for a period of 7 years.
5. E Ltd. issued ₹ 2,20,000 debentures to a creditor for ₹ 2,00,000 capital expenditure in satisfaction of his claim.

Newtown Ltd. was formed on 1st April, 2012, with an authorized capital of ₹ 10,00,000 divided into equity shares of ₹ 10 each. It invited applications for 20,000 shares in the year of its formation, all of which were subscribed for and amount due on them fully received. 

On 1st April, 2013, the company invited applications for another 50,000 shares. Applications for 45,000 shares were received. All calls were made and the amount received on them except the final call of ₹ 2 per share on 1,000 shares. 

Out of the shares on which the final call was not received, 600 were forfeited.

On 1st April, 2013, the company also issued 2,000 6% debentures of ₹100 each at a discount of 4%, redeemable at a premium of 5% in four equal annual installments beginning from the second year of the issue. 

The company had a balance of ₹ 1,00,000 in its Capital Reserve on 31st March, 2014. 

You are required to show the items under the heading Equity and Liabilities in the Balance Sheet of the company as of 31st March, 2014 (as per Schedule III, showing clearly Notes to Accounts). Ignore interest on debentures. Loss on the issue of debentures is to be written off in the first year itself.

Debenture holders are the ______.

Debentures represent the ______.

Zero Coupon Bonds are issued ______.

Interest payable on debentures is ______.

A debenture holder is entitled to:

On liquidation of company, principal amount of debentures is returned:

Which of the following statements is false?

Which of the following is not a characteristic of Bearer Debentures?

Which of the following statements is false?

Which of the following statements is false?

The Principal amount of debentures will be repaid by the company either at the end of a specified period or by installments during the lifetime of the company. Such types of debentures are called ______.

The debentures whose principal amount is not repayable by the company during its lifetime, but the payment is made only at the time of Liquidation of the company, such debentures are called ______.

Debenture Application Account is in the nature of ______.

Discount on issue of debentures is in the nature of ______.

Premium received on issue of debentures may be utilised for:

‘A’ Limited purchased the assets from ‘B’ Limited for ₹ 5,40,000. ‘A’ Limited issued 10% debentures of ₹ 100 each at a 10% discount against the payment. The number of debentures received by ‘B’ Limited will be:

‘A’ Limited purchased the assets from ‘B’ Limited for ₹5,40,000. ‘A’ Limited issued 10% debentures of ₹ 100 each at a 20% premium against the payment. The number of debentures received by ‘B’ Limited will be ______.

‘A’ Limited purchased the assets from ‘B’ Limited for ₹ 8,10,000. ‘A’ Limited issued 10% debentures of ₹ 100 each at a 10% discount against the payment. The number of debentures received by ‘B’ Limited will be ______.

Debentures of a company can be issued:

On issue of debentures as a collateral security, which account is credited?

Debentures issued as collateral security will be debited to ______.

When debentures of ₹ 1,00,000 are issued as Collateral Security against a loan of ₹ 1,50,000, the entry for issue of debentures will be:

Interest on debentures issued as a collateral security is paid on:

On 1st April, 2022, Halogen Ltd. issued 4,000, 8% Debentures of ₹ 100 each, to be redeemed in four equal annual installments beginning from 31st March, 2024. The interest on these debentures was payable half-yearly, on 30th September and 31st March, every year.

What is the journal entry to close the Interest on Debentures A/c on the 31st March, 2025?

Premium on Redemption of Debentures Account is a ______.

X Ltd. acquired assets of ₹ 20 lakhs and took over creditors of ₹ 20 thousand from Y Ltd. X Ltd. issued 8% debentures of ₹ 200 each at a discount of 10% as purchase consideration. Number of debentures issued will be ______.

X Ltd. purchased a building for ₹ 60,00,000 payable as 20% in Cash and balance by allotment of 8% debentures of ₹ 500 each at a premium of 20%. Number of debentures issued will be ______.

Those debentures where a charge is created on the assets of the company for the purpose of payment in case of default are known as ______.

If Vendors are issued debentures of ₹ 80,000 in consideration of net assets of ₹ 1,00,000, the balance of ₹ 20,000 will be credited to ______.

If Vendors are issued debentures of ₹ 4,40,000 in consideration of assets of ₹ 5,00,000 and liabilities of ₹ 1,00,000, the balance of ₹ 40,000 will be debited to ______.

A Ltd. issued 1,000, 10% debentures of ₹ 100 each at a premium of 5%. What will be the total amount of interest for one year?

On 1st April 2024, Sunrise Limited issued 5,000, 8% debentures of ₹ 100 each at a discount of 5%. What will be the total amount of interest for the year ending 31st March, 2025?

Globe Ltd. issues 20,000, 9% debentures of ₹ 100 each at a discount of 5%, redeemable at the end of 5 years at a premium of 6%. For what amount ‘Loss on Issue of Debentures Account’ will be debited?

Issued 5,000, 12% debentures of ₹ 100 each at a discount of 2%, redeemable at a premium of 5%. In such a case ______.

Issued 4,000, 12% debentures of ₹ 100 each at a premium of 4%, redeemable at a premium of 10%. In such a case ______.

When debentures are to be redeemed at a premium, an extra entry has to be made at the time of issue of debentures. Which A/c should be debited in this entry?

The debentures which do not carry a specific rate of interest are called ______.

Which of the following statements is/are True in case of Debentures?

1. The Debenture Holder is entitled to a fixed rate of Interest.
2. Debenture Holder is entitled to a fixed rate of dividend.
3. Debenture Holder is entitled to voting rights.
4. Interest on Debentures is a charge against profits.
5. Interest on Debentures is an appropriation of profits.

Choose the most appropriate answer from the options given below:

While issuing ______ type of Debentures, company doesn’t give any undertaking for the repayment of money borrowed by issuing such debentures.

Savitri Ltd. issued 50,000, 8% Debentures of ₹ 100 each at a certain rate of premium to be redeemed at a 10% premium. At the time of writing off Loss on Issue of Debentures, Statement of Profit and Loss was debited with ₹ 2,00,000. At what rate of premium, these debentures were issued?

Durga Ltd. issued 80,000, 10% Debentures of ₹ 100 each at a certain rate of discount and were to be redeemed at a 20% premium. Existing balance of Securities Premium before issuing of these debentures was ₹ 25,00,000 and after writing off Loss on the Issue of Debentures, the balance in Securities Premium was ₹ 5,00,000. At what rate of discount, these debentures were issued?

Select the correct statement from the following options.

Which of the following statements is incorrect about debentures?

Which of the following statements is incorrect?

Diksha Ltd. issued 4,000, 9% Debentures of ₹ 100 each at a discount of 10%, redeemable at a premium. If the amount of ‘Loss on Issue of Debentures Account’ was ₹ 60,000, then the amount of premium on redemption was ______.

Sujata Ltd. issued 5,000, 7% Debentures of ₹ 100 each at a premium of 10%. According to the terms of issue, 40% of the amount was payable on application and the balance on allotment. The issue was fully subscribed and all amounts were duly received. The amounts received on application and allotment, respectively, were ______.

Which one of the following can be used by a company to write off any loss on issue of debentures?

Orange Ltd. took over assets of ₹ 7,00,000 and liabilities of ₹ 60,000 of Purple Ltd. for a purchase consideration of ₹ 6,30,000 payable by the issue of 10% Debentures of ₹ 100 each at a premium of 10% and, if need be, a part of the purchase consideration in cash. How will the company meet the purchase consideration?

A company issued 5,000, 10% Debentures of ₹ 100 each at a discount of 5%. To write off the capital loss, it has to use its profits in a certain order.

Choose the correct order in which the profits are used by the company to write off the capital loss:

P Statement of Profit & Loss

Q Capital Reserve

R Securities Premium

Bhim International Ltd., in order to raise additional funds for expansion purposes, took a loan of ₹ 10,00,000 at a rate of 12% per annum from NZ Bank on 1st July, 2023, against which it offered ₹ 15,00,000, 8% Debentures of ₹ 100 each as collateral security.

Calculate the finance cost to the company for the year 2023-24.

Assertion (A): Debentures can be issued at a discount of more than 10% of the face value.

Reason (R): There are no restrictions on the issue of debentures at a discount.

In the context of the above two statements, which of the following is correct?

Assertion (A): Debenture is a part of ownership capital. As such, a company can issue debentures with voting rights.

Reason (R): Debentureholders are not members of the company.

In the context of the above two statements, which of the following is correct?

Assertion (A): Interest on debentures is payable whether the company earns profits or incurs loss.

Reason (R): Interest on debentures is a charge against the profits of the company.

In the context of the above two statements, which of the following is correct?

Assertion (A): A zero coupon bond is issued at zero rate of interest.

Reason (R): In case of zero coupon bond the difference between issue price and the redemption price represents the total interest.

In the context of the above two statements, which of the following is correct?

Assertion (A): While preparing the Balance Sheet as at 31st March, 2025, if ₹ 5,00,000, 10% debentures are redeemable on 31st October, 2025, they will be shown under main head ‘Current Liabilities’ and sub-head ‘Other Current Liabilities’ as ‘Current Maturities of long-term Debts.’ 

Reason (R): Debentures becoming due for redemption within 12 months from the date of Balance Sheet are shown as Current Maturities of Long-term Debts under the main head Current Liabilities.

In the context of the above two statements, which of the following is correct?

Assertion (A): Premium on issue of debentures is a capital gain for the company.

Reason (R): Loss on issue of debentures is a revenue loss.

In the context of the above two statements, which of the following is correct?

Assertion (A): Debentures may have fixed or floating charge on the assets of the company.

Reason (R): Fixed charge denies the company from dealing with mortgaged assets, whereas the floating charge does not prevent the company from using the assets.

In the context of the above two statements, which of the following is correct?

Assertion (A): As per terms of issue, debentures may be redeemed at par, at premium or at a discount.

Reason (R): Premium on redemption of debentures is shown under Security Premium in the Balance Sheet.

In the context of the above two statements, which of the following is correct?

Assertion (A): Premium on Redemption of Debentures is a Personal Account.

Reason (R): It appears under the head ‘Non-Current Liabilities’ under subhead ‘Other Long-term Liabilities.’

In the context of the above two statements, which of the following is correct?

Assertion (A): Interest on debentures issued as a collateral security is paid on nominal value of debentures.

Reason (R): Interest on such debentures is paid quarterly, half-yearly or yearly, as per the terms of issue.

In the context of the above two statements, which of the following is correct?

Assertion (A): Security Premium received on issue of debentures may be utilised for writing off capital losses, such as discount on issue, premium on redemption, preliminary expenses and for declaration of dividend.

Reason (R): Security Premium may be used for issue of fully paid bonus shares.

In the context of the above two statements, which of the following is correct?

Statement I: As per the Companies Act 2013, no company (engaged in any project) is allowed to issue debentures having a maturity date of more than 10 years.

Statement II: A company engaged in infrastructure projects can issue debentures for a maturity period more than 10 years but no exceeding 30 years.

In the light of the above statements, choose the most appropriate answer from the options given below.

Assertion (A): Irredeemable debentures are also known as perpetual debentures.

Reason (R): The company does not give any undertaking for the repayment of money borrowed by issuing such debentures. They are repayable on the winding up of the company.

Choose the correct option from the following.