Accounting for Debentures Test

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Accounting for Debentures Test - 5

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Question 1
1 / -0

When a company purchases some assets and issues debentures as a payment for the purchase, to the vendors it is known as issue of

A
Debentures issued as collateral security

B
Debentures issued for cash

C
Debentures issued for consideration other than cash

D
All of these

Solution

When a company purchases some assets and issues debentures as a payment for the purchase, to the vendors it is known as issue of debentures for consideration other than cash.
Question 2
1 / -0

While passing the journal entry for the purchase of assets from vendor which account should be credited

A
Discount A/c

B
Assets A/c

C
Debenture A/c

D
Vendor A/c

Solution

When a company purchased assets form an outsider and payment is not made in cash and it is settled by issue of debentures in such a case Vendor’s Account is to be credited.
Question 3
1 / -0

Vinod Limited offered 10,000 debentures @ 100 each at a premium of 10%. The issue was oversubscribed by 3 times. Company made full allotment to 2,000 applicants and pro-rata allotment to the applicants of 18,000 debentures. How many applications were rejected?

A
20,000

B
18,000

C
10,000

D
12,000

Solution

Total 10,000 Applications were rejected by the company.
Applications received = 10,000 x 3 times = 30,000
Full allotment made to only 2000 (30,000 – 2,000) remaining 28,000
Pro-rata allotment made to only 18,000 (28,000 – 18,000)
Question 4
1 / -0

Vinod Limited offered 20,000 debentures @ 100 each at a premium of 10%. The issue was oversubscribed by 3 times. Company made full allotment to 4,000 applicants and pro-rata allotment to the applicants of 36,000 debentures and remaining applications rejected. How much amount is to be refunded by the company?

A
22,00,000

B
18,00,000

C
44,00,000

D
20,00,000

Solution

Company has refunded Rs.44,00,000. Excess money received from all the applicants will be refunded.
Question 5
1 / -0

Vinod Limited offered 20,000 debentures @ 100 each at a premium of 10%. The issue was oversubscribed by 3 times. Company made full allotment to 4,000 applicants and pro-rata allotment to the applicants of 36,000 debentures and remaining applications rejected. What amount is to be credited to the Securities premium account?

A
2,00,000

B
40,000

C
4,00,000

D
3,60,000

Solution

Amount to be credited to the Securities Premium Account Rs.2,00,000. i.e. Applications issued 20,000 x Premium Rate 10 = 2,00,000
Question 6
1 / -0

If a company issues its debentures at premium and receive excess applications out of which some are rejected and pro-rata allotment made to the remaining. Full amount is payable on application only. What journal entries will you record?

A
(i) Bank A/c Dr. and Deb. App. & Allot. A/c Cr.
(ii) Deb. App. & Allot. A/c Dr. ; Debenture A/c Cr. Bank A/c Cr.

B
(i) Bank A/c Dr. and Deb. App. & Allot. A/c Cr.
(ii) Deb. App. & Allot. A/c Dr. ; Debenture A/c Cr. Securities premium Cr. Bank A/c Cr.

C
(i) Bank A/c Dr. and Deb. App. & Allot. A/c Cr. Securities premium Cr.
(ii) Deb. App. & Allot. A/c Dr. ; Debenture A/c Cr. Bank A/c Cr.

D
(i) Bank A/c Dr. and Deb. App. & Allot. A/c Cr.
(ii) Deb. App. & Allot. A/c Dr. ; Debenture A/c Cr. Securities premium Cr.

Solution

Following journal entry will be recorded in the books:
(i) Bank A/c Dr. and Deb. App. & Allot. A/c Cr.
(ii) Deb. App. & Allot. A/c Dr. ; Debenture A/c Cr. Securities premium Cr. Bank A/c Cr.

At the time of allotment excess money should be refund. so bank account will be credit with that amount.
Question 7
1 / -0

Name the security which is issued in addition to the principal security

A
Collateral security and Principal security

B
Principal security

C
Security Premium

D
Collateral security

Solution

Sometimes a company issue its debentures as a subsidiary or secondary security. Such issue is known as issue of debentures a collateral security.
Question 8
1 / -0

Under any situation Debentures cannot be shown in the Balance Sheet as:

A
Shareholders’ Funds

B
Long Term Borrowings

C
Short Term Borrowings

D
Other Current Liabilities

Solution

Debentures can be shown as long term borrowings, short term borrowings and other current liabilities, under different situations but cannot be shown as Shareholders Funds.
Question 9
1 / -0

Vinod Limited issued 7,000 debentures @ 1,000 each at a discount of 10%. Rs.300 payable on application and balance on allotment. Find the amount received on allotment?

A
40,00,000

B
42,00,000

C
49,00,000

D
45,00,000.

Solution

Amount Received on Allotment Rs.42,00,000 i.e. 7,000 × 600 = 42,00,000
Question 10
1 / -0

When does a company issue debentures as collateral security

A
When lender does not gives additional security

B
When lender gives additional security

C
When lender demands additional security

D
When lender does not demands additional security

Solution

A company issue its debentures as collateral security when lender demands for the additional security in addition to the prime or principal security.

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Re-Attempt Weekly Quiz Competition

Accounting for Debentures Test - 5

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Accounting for Debentures Test - 5

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Question 1

Debentures issued as collateral security

Debentures issued for cash

Debentures issued for consideration other than cash

All of these

Solution

Question 2

Discount A/c

Assets A/c

Debenture A/c

Vendor A/c

Solution

Question 3

20,000

18,000

10,000

12,000

Solution

Question 4

22,00,000

18,00,000

44,00,000

20,00,000

Solution

Question 5

2,00,000

40,000

4,00,000

3,60,000

Solution

Question 6

(i) Bank A/c Dr. and Deb. App. & Allot. A/c Cr. (ii) Deb. App. & Allot. A/c Dr. ; Debenture A/c Cr. Bank A/c Cr.

(i) Bank A/c Dr. and Deb. App. & Allot. A/c Cr. (ii) Deb. App. & Allot. A/c Dr. ; Debenture A/c Cr. Securities premium Cr. Bank A/c Cr.

(i) Bank A/c Dr. and Deb. App. & Allot. A/c Cr. Securities premium Cr. (ii) Deb. App. & Allot. A/c Dr. ; Debenture A/c Cr. Bank A/c Cr.

(i) Bank A/c Dr. and Deb. App. & Allot. A/c Cr. (ii) Deb. App. & Allot. A/c Dr. ; Debenture A/c Cr. Securities premium Cr.

Solution

Question 7

Collateral security and Principal security

Principal security

Security Premium

Collateral security

Solution

Question 8

Shareholders’ Funds

Long Term Borrowings

Short Term Borrowings

Other Current Liabilities

Solution

Question 9

40,00,000

42,00,000

49,00,000

45,00,000.

Solution

Question 10

When lender does not gives additional security

When lender gives additional security

When lender demands additional security

When lender does not demands additional security

Solution

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(i) Bank A/c Dr. and Deb. App. & Allot. A/c Cr.
(ii) Deb. App. & Allot. A/c Dr. ; Debenture A/c Cr. Bank A/c Cr.

(i) Bank A/c Dr. and Deb. App. & Allot. A/c Cr.
(ii) Deb. App. & Allot. A/c Dr. ; Debenture A/c Cr. Securities premium Cr. Bank A/c Cr.

(i) Bank A/c Dr. and Deb. App. & Allot. A/c Cr. Securities premium Cr.
(ii) Deb. App. & Allot. A/c Dr. ; Debenture A/c Cr. Bank A/c Cr.

(i) Bank A/c Dr. and Deb. App. & Allot. A/c Cr.
(ii) Deb. App. & Allot. A/c Dr. ; Debenture A/c Cr. Securities premium Cr.