Sources of Business Finance Test

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Sources of Business Finance Test - 19

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Weekly Quiz Competition

Question 1
1 / -0

Which of these A/c is created for redemption of debentures ________

A
Sinking fund A/c

B
Debentures suspense A/c

C
Debenture redemption Reserve fund

D
Debenture redemption fund A/c
Question 2
1 / -0

Which of these transaction effect working capital

A
redemption of debenture

B
sale of inventory

C
realization of debtors

D
payment to creditors
Question 3
1 / -0

Which of these is /are the method (s) of redemption of debentures.

A
conversion into new class of debentures

B
conversion into equity shares

C
purchase of own debenture from the market

D
all the three
Question 4
1 / -0

Debentures can be redeemed out of _______

A
Capital profit

B
Revenue profit

C
Capital

D
Out of any or all of the above three sources

Solution

Profit on redemption of debentures is a capital profit. It is used to write-off discount on issue of debentures/shares; otherwise it will be transferred to capital reserve. Debentures may be redeemed out of capital or out of profits whether capital or revenue.
Therefore, D is the correct option.
Question 5
1 / -0

XYZ Ltd. purchased a plant for Rs 1,20,000 payable Rs 25,000 in cash and balance by issue of 13% debentures of Rs 100 each. How many debentures would be required to be issued to the vendor

A
950 debentures of Rs 100 each

B
900 debentures of Rs 100 each

C
1000 debentures of Rs 100 each

D
995 debentures of Rs 100 each
Question 6
1 / -0

In question No.35 if the company cancels the debentures purchased on 31.03.09. what entry would be passed for cancellation of debentures when they were purchased cum interest

A
10% Debentures A/c Dr. Rs. 20,000, Cr.Own Debentures A/c Rs.18,700, Profit cancellation of own Debentures A/c Rs.1300

B
10% Debentures A/c Dr. Rs. 20,000, Cr.Own Debentures A/c Rs.20,000

C
10% Debentures A/c Dr. Rs. 20,000, Cr.Own Debentures A/c Rs.19,000, Profit cancellation of own Debentures A/c Rs.1000

D
10% Debentures A/c Dr. Rs. 20,000, Cr.Own Debentures A/c Rs.19,200, Profit cancellation of own Debentures A/c Rs.800
Question 7
1 / -0

In the event of liquidation of a company, the debenture holders have prior right over

A
Principle amount

B
Interest

C
Both

D
Either (a) or (b)

Solution

The rights and remedies of debenture holders are as follows:-
(i) They can file a suit against the company for the principal as well as for the interest.
(ii) They can file an application to the court regarding compulsory dissolution of the company.
(iii) If the company is under the process of winding up, they can claim their principal as well as interest.
Therefore, C is the correct option.
Question 8
1 / -0

Which of these is not a method of redemption of debentures

A
By open market purchase

B
By conversion into equity or debentures

C
By lottery draw

D
By mutilation
Question 9
1 / -0

A company has issued 1000 15% debenture of Rs.1000 each. The prefix 15% stand for

A
Rate of interest payable

B
Rate of premium

C
Discount

D
Rate of dividend
Question 10
1 / -0

A company issued 11% redeemable debentures of face value Rs. 10,00,000 at Rs. 11,00,000. The interest on debenture for the first year will be..........

A
Rs. 100000

B
Rs. 1,10,000

C
Rs. 99,000

D
Rs. 90,000

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Sources of Business Finance Test - 19

Result

Sources of Business Finance Test - 19

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SHARING IS CARING

Question 1

Sinking fund A/c

Debentures suspense A/c

Debenture redemption Reserve fund

Debenture redemption fund A/c

Question 2

redemption of debenture

sale of inventory

realization of debtors

payment to creditors

Question 3

conversion into new class of debentures

conversion into equity shares

purchase of own debenture from the market

all the three

Question 4

Capital profit

Revenue profit

Capital

Out of any or all of the above three sources

Solution

Question 5

950 debentures of Rs 100 each

900 debentures of Rs 100 each

1000 debentures of Rs 100 each

995 debentures of Rs 100 each

Question 6

10% Debentures A/c Dr. Rs. 20,000, Cr.Own Debentures A/c Rs.18,700, Profit cancellation of own Debentures A/c Rs.1300

10% Debentures A/c Dr. Rs. 20,000, Cr.Own Debentures A/c Rs.20,000

10% Debentures A/c Dr. Rs. 20,000, Cr.Own Debentures A/c Rs.19,000, Profit cancellation of own Debentures A/c Rs.1000

10% Debentures A/c Dr. Rs. 20,000, Cr.Own Debentures A/c Rs.19,200, Profit cancellation of own Debentures A/c Rs.800

Question 7

Principle amount

Interest

Both

Either (a) or (b)

Solution

Question 8

By open market purchase

By conversion into equity or debentures

By lottery draw

By mutilation

Question 9

Rate of interest payable

Rate of premium

Discount

Rate of dividend

Question 10

Rs. 100000

Rs. 1,10,000

Rs. 99,000

Rs. 90,000

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