Issue and Redemption of Debentures Test 2

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Issue and Redemption of Debentures Test 2

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Weekly Quiz Competition

Question 1
1 / -0

Whenever debentures are cancelled any profit on cancellation is transferred to ___________________.

A
Profit & loss account

B
General reserve account

C
Capital redemption reserve account

D
Capital reserve account
Question 2
1 / -0

As per SEBI Guidelines Debenture Redemption reserve is required to be created in case the company issue debentures with a maturity of __________.

A
more than 18 months

B
2 years

C
10 years

D
5 years
Question 3
1 / -0

When debentures are redeemed out of profits the accounting entry for redemption is:

A

Debenture account
Bank Account Dr.

Cr.

B

Debenture account
Profit and loss appropriation account Dr.

Cr.

C

Debenture account
Debentures redemption reserve account Dr.

Cr.

D

Debenture Account
General Reserve Dr.

Cr.
Question 4
1 / -0

Manoj Industries issued 10,000.15% debentures of Rs. 100 each at 10% premium but redeemed at par. How would you journalise the transaction ?

A
Bank A/c Dr. Rs. 1100000, Credit 15% Debentures A / c Rs. 10,00,000, Premium on issue of Debenture A/c Rs. 100,000

B
Bank A/c Dr. Rs. 10,00,000, Credit 15% Debentures A/c Rs. 900,000, Premium on issue of Debenture A/c Rs. 100,000

C
Bank A/c Dr. Rs. 880,000, Credit 15% Debentures A/c Rs. 880,000

D
Bank A/c Dr. Rs. 880,000, Premium on issue of Debenture Rs. 80,000, Credit 15% Debentures A/c Rs. 800,000, Premium on issue of Debenture A/c Rs. 80,000
Question 5
1 / -0

Which of these is not a method of redemption of debentures ?

A
Purchase in open market

B
Auction of debentures

C
Drawing of lots

D
Payment in lump sum

Solution

Following are the methods of redemption of debentures:
1. Payment in lump-sum on the debentures' maturity.
2. Payment in instalments after the maturity date.
3. Redemption through the purchase of the debenture on the market.
4. Redemption through the conversion of debentures into new debentures or equity shares.
5. Redemption by drawing of lots.
Question 6
1 / -0

Company should created DRR equivalent to _____% of the amount of debenture issue before redemption of debenture can commence.

A
75

B
40

C
50

D
25
Question 7
1 / -0

Murlidhar Industries issued 10,000.10% debentures of Rs. 100 each at 10% discount and redeemable at 10% premium. What is the required journal entry?

A
Dr. Bank A/c Rs. 900,000, Discount on issue Debenture A/c Rs. 80,000, Cr. Debenture A/c Rs. 800,000, Premium of Redemption of Debenture A/c Rs. 80,000

B
Dr. Bank A/c Rs. 1000,000, Loss on redemption of debenture Rs. 80,000, Cr. Debenture A/c Rs. 10,00,000, Loss on issue of Debenture A/c Rs. 80,000

C
Dr. Bank A/c Rs. 900,000, Discount on issue Debenture A/c Rs. 100,000, Loss on Redemption of Debenture A/c Rs. 100,000 Cr. Debenture A/c Rs. 10,00,000, Premium of Redemption of Debenture A/c Rs. 100,000

D
Dr. Bank A/c Rs. 800,000, Loss on redemption of debenture Rs. 80,000, Cr. Debenture A/c Rs. 800,000, Loss on issue of Debenture A/c Rs. 80,000
Question 8
1 / -0

Preference shares may be redeemed out of________________.

A
Proceeds of Debentures

B
Proceeds of new issue of shares

C
Out of divisible profits

D
Both (b) and (c)
Question 9
1 / -0

Which of the following accounts can be transferred to capital redemption reserve account?

A
General reserve account

B
Forfeited shares account

C
Profit prior to incorporation

D
Share premium account

Solution

Capital Redemption Reserve (CRR) is a requirement under the Companies Act which applies to buy-back schemes and redemptions of preference capital. The requirement should be followed by companies that are redeeming preference capital through any of the three specified modes. The specified modes include redemption from distributable profit like general reserve and redemption through a fresh issue of capital.
Therefore, A is the correct option.
Question 10
1 / -0

When Debentures are issued which are redeemable at a premium, the amount of premium payable on redemption is?

A
Capital loss

B
Revenue loss

C
Deferred Revenue loss

D
Revenue profit

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Re-Attempt Weekly Quiz Competition

Issue and Redemption of Debentures Test 2

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Issue and Redemption of Debentures Test 2

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Question 1

Profit & loss account

General reserve account

Capital redemption reserve account

Capital reserve account

Question 2

more than 18 months

2 years

10 years

5 years

Question 3

Debenture account Bank AccountDr. Cr.

Debenture account Profit and loss appropriation accountDr. Cr.

Debenture account Debentures redemption reserve accountDr. Cr.

Debenture Account General ReserveDr. Cr.

Question 4

Bank A/c Dr. Rs. 1100000, Credit 15% Debentures A / c Rs. 10,00,000, Premium on issue of Debenture A/c Rs. 100,000

Bank A/c Dr. Rs. 10,00,000, Credit 15% Debentures A/c Rs. 900,000, Premium on issue of Debenture A/c Rs. 100,000

Bank A/c Dr. Rs. 880,000, Credit 15% Debentures A/c Rs. 880,000

Bank A/c Dr. Rs. 880,000, Premium on issue of Debenture Rs. 80,000, Credit 15% Debentures A/c Rs. 800,000, Premium on issue of Debenture A/c Rs. 80,000

Question 5

Purchase in open market

Auction of debentures

Drawing of lots

Payment in lump sum

Solution

Question 6

75

40

50

25

Question 7

Dr. Bank A/c Rs. 900,000, Discount on issue Debenture A/c Rs. 80,000, Cr. Debenture A/c Rs. 800,000, Premium of Redemption of Debenture A/c Rs. 80,000

Dr. Bank A/c Rs. 1000,000, Loss on redemption of debenture Rs. 80,000, Cr. Debenture A/c Rs. 10,00,000, Loss on issue of Debenture A/c Rs. 80,000

Dr. Bank A/c Rs. 900,000, Discount on issue Debenture A/c Rs. 100,000, Loss on Redemption of Debenture A/c Rs. 100,000 Cr. Debenture A/c Rs. 10,00,000, Premium of Redemption of Debenture A/c Rs. 100,000

Dr. Bank A/c Rs. 800,000, Loss on redemption of debenture Rs. 80,000, Cr. Debenture A/c Rs. 800,000, Loss on issue of Debenture A/c Rs. 80,000

Question 8

Proceeds of Debentures

Proceeds of new issue of shares

Out of divisible profits

Both (b) and (c)

Question 9

General reserve account

Forfeited shares account

Profit prior to incorporation

Share premium account

Solution

Question 10

Capital loss

Revenue loss

Deferred Revenue loss

Revenue profit

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Debenture account
Bank Account Dr.

Cr.

Debenture account
Profit and loss appropriation account Dr.

Cr.

Debenture account
Debentures redemption reserve account Dr.

Cr.

Debenture Account
General Reserve Dr.

Cr.