Accounting for Debentures Test

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Accounting for Debentures Test - 7

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Weekly Quiz Competition

Question 1
1 / -0

Vinod Limited is engaged in a banking business and has to redeem its debentures worth ₹40,000 by paying a lump sum amount to the debenture holders. How much DRR company should create?

A
No DRR is required

B
40,000

C
20,000

D
10,000

Solution

As per the Section 71 (4) of the Companies Act, 2013 and Rule 18 (7) of the companies Rules 2014, a banking company is not required to create DRR.
Question 2
1 / -0

Vinod Limited acquired assets of Rs.20 Lakhs and took over creditors of ₹2,00,000 from Kumar Enterprises. Vinod Limited issued 8% Debenture of Rs.100 each at par as purchase consideration. Find out how many debenture issued by the company?

A
2,000

B
20,000

C
10,000

D
18,000

Solution

Vinod Limited has issued 18,000 Debentures to the Kumar Enterprises i.e. 18,00,000/100 = 18,000 Debentures
Question 3
1 / -0

Vinod Limited acquired assets of ₹50 Lakhs and took over creditors of ₹5,00,000 from Kumar Enterprises. Vinod Limited issued 8% Debenture of ₹100 each at a premium of 25% as purchase consideration. Calculate the number of debentures issued by the company.

A
36,000

B
45,000

C
50,000

D
40,000

Solution

Vinod Limited has issued 36,000 Debentures to the Kumar Enterprises i.e. 45,00,000/125 = 36,000 Debentures
Question 4
1 / -0

What journal entry will take place for the transfer of gain on cancellation of own debentures?

A
Gain on Cancellation of own debenture A/c Dr.
To General Reserve

B
Debenture Redemption Reserve To Capital Reserve

C
Gain on Cancellation of own debenture A/c Dr.
To Capital Reserve

D
Debenture Redemption Reserve
To General Reserve

Solution

At the time of transfer of gain on cancellation of own debentures: Capital reserve account will be credited as it is the capital profit.
Question 5
1 / -0

Why does a company purchase its own debentures from the open market?

A
For Cancellation OR Investment

B
For Raising Finance

C
For Investment only

D
For Cancellation only

Solution

The main purpose of a company in purchasing its own debentures from the open market can be:
(i) For Immediate Cancellation
(ii) For Investment Purpose
Question 6
1 / -0

In Which account the balance of DRR is transferred after the redemption of debentures?

A
Debenture Redemption Reserve

B
General Reserve

C
Capital Reserve

D
Securities Premium Reserves

Solution

Balance amount of DRR (Debenture Redemption Reserve) is transferred to the General Reserve after redemption of all the debentures.
Question 7
1 / -0

Redemption of Debentures means……

A
Repayment of capital

B
Repayment of profits

C
Repayment of loan

D
Repayment of Reserves

Solution

Redemption of debentures is a process of paying back to the debenture holders which is also known as repayment of loan.
Question 8
1 / -0

Debentures which are not repayable during the lifetime of the company are called…..

A
Non-convertible Debentures

B
Redeemable Debentures

C
Convertible Debentures

D
Perpetual or Irredeemable Debentures

Solution

Debentures which are not repayable during the lifetime of the company are called Perpetual debentures or irredeemable debentures. These debentures can be redeemed only at the time of liquidation
Question 9
1 / -0

Creation of DRR is compulsory in case of …….

A
Convertible Debentures

B
Banking Companies

C
Non-Convertible Debentures

D
All India Financial Institutions

Solution

Creation of DRR is compulsory in case of Non-convertible Debentures. An amount equal to at least 25% of the face value should be transferred to Debenture Redemption Reserve.

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Re-Attempt Weekly Quiz Competition

Accounting for Debentures Test - 7

Result

Accounting for Debentures Test - 7

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SHARING IS CARING

Question 1

No DRR is required

40,000

20,000

10,000

Solution

Question 2

2,000

20,000

10,000

18,000

Solution

Question 3

36,000

45,000

50,000

40,000

Solution

Question 4

Gain on Cancellation of own debenture A/c Dr. To General Reserve

Debenture Redemption Reserve To Capital Reserve

Gain on Cancellation of own debenture A/c Dr. To Capital Reserve

Debenture Redemption Reserve To General Reserve

Solution

Question 5

For Cancellation OR Investment

For Raising Finance

For Investment only

For Cancellation only

Solution

Question 6

Debenture Redemption Reserve

General Reserve

Capital Reserve

Securities Premium Reserves

Solution

Question 7

Repayment of capital

Repayment of profits

Repayment of loan

Repayment of Reserves

Solution

Question 8

Non-convertible Debentures

Redeemable Debentures

Convertible Debentures

Perpetual or Irredeemable Debentures

Solution

Question 9

Convertible Debentures

Banking Companies

Non-Convertible Debentures

All India Financial Institutions

Solution

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Gain on Cancellation of own debenture A/c Dr.
To General Reserve

Gain on Cancellation of own debenture A/c Dr.
To Capital Reserve

Debenture Redemption Reserve
To General Reserve