D. K. Goel solutions for Accountancy Volume 1 and 2 [English] Class 12 ISC chapter 8 - Company Accounts - Redemption of Debentures [Latest edition]

What is meant by redemption of debentures?

Name two sources of finance for redemption of debentures.

What is meant by redemption of debentures out of Capital?

What is meant by redemption of debentures out of Profits?

Mention, in brief, SEBI Guideline regarding Debenture Redemption Reserve.

Which Companies are exempted from creating ‘Debenture Redemption Reserve’ by the SEBI?

Profit on redemption of debentures is transferred to which account?

What is meant by redemption of debentures by lump sum payment?

X Ltd. (an unlisted company) wants to redeem 5,000, 5% Debentures of ₹ 100 each at 5% premium. How much amount it must transfer to Debenture Redemption Reserve, if it has already a balance of ₹ 40,000 in Debenture Redemption Reserve Account?

What is the balance of Debenture Redemption Reserve transferred to General Reserve?

What is the maximum limit of debentures which companies, other than banking companies and All India Financial Institutions, can redeem out of capital?

Gabby Ltd. (a listed NBFC) has 30,000, 5% Debentures of ₹ 100 each due for redemption at par on 31st March, 2022.
The Debenture Redemption Investment which was purchased on 30th April, 2021, was realized on the date of redemption at 102% less 0.5% brokerage, and the debentures were redeemed.
You are required to calculate the sale price of the Debenture Redemption Investment.

As a result of the measures taken by the government in the year 2019-20 of non-creation of Debenture Redemption Reserve by listed companies/NBFCs or HFCs, the investments in the debenture issues from these companies have become riskier.

State the adverse impact of this measure on the investors?

Matrix Ltd. (an unlisted construction company) redeems its 7,000, 10% Debentures of ₹ 100 each in instalments as follows:

How much will the company transfer from Debenture Redemption Reserve to General Reserve on 31st March, 2023?

Sunrise Ltd. a listed NBFC, had outstanding 20,000, 7% Debentures of ₹ 100 each, due for redemption on 31st March, 2022.

As per the provisions of the Companies Act, 2013, what amount, if any, does the company need to transfer to Debenture Redemption Reserve, before it can redeem the debentures?

Kaveri Ltd. (an unlisted company) issued 50,000, 8% Debentures of ₹ 100 each at par on Oct. 1, 2020 redeemable on March, 31, 2025. It was decided to invest 15% of the face value of debentures to be redeemed towards Debenture Redemption Investment on 30th April, 2024. Debentures were redeemed on due date. Record necessary entries for issue and redemption of debentures.

On 1st April, 2022, F Ltd. (an unlisted company) issued ₹ 40,00,000, 7% Debentures of ₹ 100 each at a premium of 5%, redeemable at a premium of 10% at the end of 4 years. Investment as required by law was made in fixed deposit of the bank on 30th April earning interest @ 6% p.a.

Pass journal entries at the time of Redemption of Debentures.

Bank of Baroda issued 8,000, 8% Debentures of ₹ 100 each at a premium of 6% on 1st April, 2016 redeemable on 31st March, 2025. Record necessary entries for issue and redemption of debentures.

On 1st April, 2012, Neptune Finance Company (a listed NBFC) issued 4,000, 9% Debentures of ₹ 100 each to be redeemed at a premium of 5% on 31st March, 2021.

You are required to pass necessary journal entries for the issue and redemption of debentures.

On 1st April, 2021, the following balances appeared in the books of Blue and Green Ltd. (an unlisted company):

The company met the requirements of Companies Act, 2013 regarding Debenture Redemption Reserve and Debenture Redemption investments and redeemed the debentures.

Ignoring interest on investments, pass necessary Journal entries for the above transactions in the books of company.

Gati Ltd. (an unlisted company) has issued 30,000, 8% Debentures of ₹ 100 each of which one-third is due for redemption on March 31st 2022. The company has in its Debenture Redemption Reserve Account a balance of ₹ 1,20,000 on 31st March, 2021. Required Investment is made in fixed deposit on 30th April 2021 bearing interest @ 6% p.a. Record the necessary journal entries for the Redemption of Debentures.

On April 1st, 2022 following were the balances of Blue Bird Ltd. (an unlisted company):

Required investment was made, earning interest @ 8% p.a.

On 31 March, 2023 the Board of Directors transferred the required amount to DRR and debentures were redeemed.

Pass necessary Journal entries for the above transactions in the books of the company.

On 1-1-2018 an (unlisted Company) issued 15,000, 10% Debentures of ₹ 100 each at par which were repayable at a Premium of 15% on 31-3-2023. On the date of maturity, the company decided to redeem the above mentioned 10% Debentures as per the terms of issue, out of profits. Required investment is made on 30th April, 2022 in fixed deposit bearing interest @ 8% p.a. Bank deducted TDS @ 10% on its maturity i.e. 31st March 2023.

Pass the necessary journal entries in the books of the Company for the redemption of Debentures.

Chandra Tubes Ltd. (an unlisted company) issued 70,000, 7% debentures of ₹ 100 each on June 30, 2019 redeemable at a premium of 6% on July 1, 2023. The Board of Directors have decided to transfer out of profits ₹ 2,50,000 to Debenture Redemption Reserve on March 31, 2021, ₹ 2,50,000 on March 31, 2022 and balance on March 31, 2023. Record necessary journal entries regarding issue and redemption of debentures. Ignore entries relating to writing off loss on issue of debentures and interest paid thereon.

Kuber Ltd. (an unlisted company) on 1st April 2018 acquired assets of the value of ₹7,00,000 and liabilities worth ₹ 80,000 from Varun Ltd., at an agreed value of ₹ 6,30,000. Kuber Ltd. issued 10% Debentures of ₹ 100 each at a premium of 5% in full satisfaction of purchase consideration. The debentures were redeemable on 31st October, 2023 at a premium of 4%. Pass journal entries to record the above including redemption of debentures.

Universe Ltd. (an unlisted company) has 2,00,000, 9% debentures of ₹ 50 each due for redemption in five equal annual instalments starting from March 31, 2018. Debenture Redemption Reserve has a balance of ₹ 6,00,000. Record necessary journal entries.

Priya Ltd. (an unlisted company) issued 30,000, 8% debentures of ₹ 200 each on August 1, 2016 redeemable as follows:

It was decided to transfer ₹ 1,75,000 each to Debenture Redemption Reserve on March 31, 2017 and March 31, 2018 and balance required to be transferred to Debenture Redemption Reserve on March 31, 2019. Record necessary journal entries. Ignore entries for payment of interest.

Tata Power Ltd. (an unlisted company) issued 90,000, 9% Debentures of ₹ 100 each on July 1, 2018 redeemable at a premium of 5% as under:

It was decided to transfer to Debenture Redemption Reserve ₹ 2,00,000 on March 31, 2019; ₹ 3,00,000 on March 31, 2020 and the balance on March 31, 2021. Record necessary journal entries, ignoring for interest.

On 1st April, 2019, the following balances appeared in the books of Uma Mahesh Ltd. (an unlisted company)

The debentures were to be redeemed at a premium of 5% in two equal annual instalments beginning from 31st March, 2021. The company transferred the balance amount to Debenture Redemption Reserve on 31st March, 2020. On 30th April, 2020, it met the requirements of the Companies Act, 2013 regarding Debenture Redemption Investment and redeemed the debentures on the scheduled dates.

You are required to pass necessary journal entries to record the above transactions in the books of the Company (Ignore interest on Debentures).

On 31st March, 2021, the books of Pragya Ltd. (an unlisted manufacturing company) showed the following closing balances:

In order to meet the provisions of the Companies Act, 2013, the company transferred the required balance amount to Debenture Redemption Reserve Account on 31st March, 2022. It met the requirements of Debenture Redemption Investment.

You are required to prepare the Debenture Redemption Reserve Account for the years 2021-22, 2022-23.

Phantom Ltd. (a listed NBFC) redeemed its 6,000, 10% Debentures of ₹ 100 each in instalments, as follows:

On the basis of the above details, you are required to pass journal entries to record the purchase/sale of Debenture Redemption Investment, from the year of the redemption of the first instalment of debentures to the date of the redemption of the final instalment.

Leo Ltd. (a listed NBFC) redeems its 9,000, 10% Debentures of 100 each at a premium of 5% in instalments, as follows:

You are required to prepare:

1. The Debenture Redemption Investment Account for the years 2021-22 and 2022-23.
2. 10% Debentures Account for the year 2021-22.

Eagle Ltd. (an unlisted company) has 3,000; 10% Debentures of ₹ 100 each outstanding as on 31st March, 2022. These debentures are due for redemption on 31st March, 2023. The Debenture Redemption Reserve has a balance of ₹ 10,000 on 31st March, 2022.

You are required to pass journal entries to complete the redemption of Debentures.

Ruchi Ltd. (an unlisted company) issued 42,000, 7% Debentures of ₹ 100 each on 1st April, 2019, redeemable at a premium of 8% on 31st March 2023. The Company decided to create required Debenture Redemption Reserve on 31st March 2022. The company invested the funds as required by law in a fixed deposit with State Bank of India on 1st April, 2022 earning interest @10% per annum. Tax was deducted at source by the bank on interest @10%. Pass necessary Journal Entries regarding issue and redemption of debentures.

Krishna Ltd. (an unlisted company) has issued 20,000, 9% Debentures of ₹ 100 each of which half the amount is due for redemption on March 31st 2023. It was decided to invest the required amount towards Debenture Redemption Investment. The company has in its Debenture Redemption Reserve Account a balance of ₹ 1,20,000 on 31st March, 2022. Record the necessary journal entries for the Redemption of Debentures.

Saraswati Ltd. (an unlisted company) issued 8,000, 9% debentures of ₹ 200 each at premium of 5% on June 30, 2013, redeemable on July 1, 2023. The Board of Directors decided to transfer ₹ 60,000 to Debenture Redemption Reserve on March 31, 2022 and balance on March 31, 2023. Record necessary entries for the issue as well as at the time of redemption of debentures. Ignore entries for payment of interest.

Pooja Ltd. (an unlisted company) issued 80,000, 8% debentures of ₹ 100 each on June 30, 2019 redeemable at a premium of 6% on July 1, 2023. The Board of Directors have decided to transfer out of profits ₹ 3,00,000 to Debenture Redemption Reserve on March 31, 2021, ₹ 3,00,000 on March 31, 2022 and balance on March 31, 2023. Record necessary journal entries regarding issue and redemption of debentures. Ignore entries relating to writing off loss on issue of debenture and interest paid thereon.

Arvind Ltd., (an unlisted company) had outstanding 10,000, 9% Debentures of ₹ 100 each due for redemption as follows:

Company redeemed the debentures on due dates.

You are required to prepare Debenture Redemption Investment Account.

Megha Ltd. (an unlisted company) redeemed its 30,000, 8% Debentures of ₹ 100 each as follows:

Prepare Debenture Redemption Investment Account.

Surya Ltd. (an unlisted company) redeemed its 15,000, 10% Debentures of ₹100 each as follows:

Prepare:

1. Debenture Redemption Reserve Account
2. Debenture Redemption Investment Account.

Pushpak Ltd. (an unlisted company) issued 20,000, 9% Debentures of ₹ 100 each on 1st April, 2019 redeemable at 5% premium in instalments. It redeemed the debentures as follows:

Pass Journal entries for issue and redemption of debentures.

On 1st April, 2022, the following balances appeared in the books of Alpha Pvt. Ltd.

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.

1. Debenture holders’ Account.
2. Debenture Redemption Investment Account.

On 1st April, 2022, Resorts Ltd. (a listed construction company) had 60,000, 5% Debentures of ₹100 each due for redemption at par on 31st March, 2023.
As per the law, investment was made in a fixed deposit of a bank on 30th April, 2022, earning interest @5% per annum.
Tax @10% was deducted by the bank on the interest.

You are required to pass necessary journal entries in the year of redemption of debentures, including entries for interest on Debenture Redemption Investment. (Ignore the interest on Debentures)

Honesty Ltd., an unlisted manufacturing company, had 30,000, 6% Debentures of ₹ l00 each due for redemption at par on 31st March, 2023. On this date the company had the required amount of ₹ 3,00,000 in its Debenture Redemption Reserve.

The Debenture Redemption Investment, which was purchased on 30th April, 2022, was realized at 101% on the date of redemption of the debentures and the debentures were redeemed.

You are required to pass journal entries in the books of the company for the year 2022-23. (Ignore interest on debentures)

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).

Ronny Ltd. (an unlisted construction company) redeems its 7,000, 10% Debentures of ₹100 each at a premium of 5% in instalments, as follows:

You are required to prepare for the year 2023-24:

1. General Reserve Account.
2. Debenture holders’ Account. (Ignore interest on Debentures).

As per SEBI Guidelines in case of an unlisted company, an amount equal to ______ of the debentures outstanding must be transferred to Debenture Redemption Reserve before redemption begins.

A company issuing debentures with a maturity period of not more than 18 months, in that case the creation of Debenture Redemption Reserve will be:

According to the guidelines issued by Securities and Exchange Board of India (SEBI) what percentage of the amount of debentures must be transferred to ‘Debenture Redemption Reserve’ before the commencement of redemption of debentures, in case of convertible debentures?

Utsav Ltd. (an unlisted company) decided to redeem its 4,000, 9% Debentures of ₹ 100 each which were issued at a discount of 8%, and were redeemable at a premium of 10%. The amount transferred to Debenture Redemption Reserve will be ______.

X Ltd. (an unlisted company) wants to redeem 5,000, 5% Debentures of ₹ 100 each at 5% premium. How much amount it must transfer to Debenture Redemption Reserve, if it has already a balance of ₹ 20,000 in Debenture Redemption Reserve Account?

A Company issuing debentures with a maturity period of not more than ______ need not create Debenture Redemption Reserve.

Where is ‘Debenture Redemption Reserve’ transferred after the redemption of all debentures?

Wellness Co. Ltd. (an unlisted company) has issued 20,000, 9% Debentures of ₹ 100 each at a premium of 10% on 1st April, 2018 redeemable as follows:

It transferred the required amount to Debentures Redemption Reserve on due date. How much amount will be transferred to General Reserve on 31st March, 2021

No Debenture Redemption Reserve is required for debentures issued by ______.

Premier Ltd. issued 2,000, 9% Debentures of ₹ 100 each at par, redeemable after five years at a premium of 10%. The minimum amount invested in Debenture Redemption Investments will be ______.

Relay Ltd. (an unlisted Non NBFC) redeems its 8,000, 10% Debentures of ₹ 100 each in instalments as follows:

On the basis of the above details, what will be the amount of Debenture Redemption Reserve which the company will transfer to General Reserve on 31st March, 2021?

Neptune Ltd., an unlisted manufacturing company has to redeem its 3,000, 7% Debentures of ₹ 100 each on 30th September, 2022.

As per the provisions of the Companies Act, 2013, on which date should the company invest in specified securities?

Credit Access Grameen Ltd., a listed NBFC - MFI (Micro Finance Institution), is all set to enter the bond market next week to raise up to ₹ 1,000 crore in non-convertible debentures, as it looks to diversify its liability profile. 
According to the provisions of the Companies Act, 2013, what is the maximum amount of these non-convertible debentures which Credit Access Grameen Ltd. will redeem out of its capital?

Assertion (A): In case of an unlisted company on a stock exchange, it is necessary to create debenture redemption reserve equivalent to at least 10% of debentures outstanding before commencement of redemption.

Reason (R): Debenture Redemption Reserve must be created even if debentures are redeemed through conversion.

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

Assertion (A): The Debenture Redemption Reserve Account appears on the equity & liability side of Balance Sheet under the head ‘Reserves and Surplus’.

Reason (R): Debenture Redemption Reserve is transferred to capital reserve after redemption.

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

Assertion (A): All listed as well as unlisted companies are required to invest atleast 15% of the nominal value of debentures maturing during the year.

Reason (R): Profit on sale of debenture redemption investment during the same year is a capital profit.

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

Assertion (A): In case ₹ 20,00,000, 8% debentures are outstanding and one-fifth of these debentures are to be redeemed, transfer to DRR will be ₹ 40,000.

Reason (R): In such case, amount invested in Debenture Redemption Investment will be ₹ 60,000.

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