Accounting for Debentures Test

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Accounting for Debentures Test - 7

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Weekly Quiz Competition

Question 1
1 / -0

A Ltd. had Rs. 5, 00,000 12% debentures outstanding as on 1st Jan, 2003. During the year company took a loan of Rs. 3,00,000 from Bank of Punjab for which the company placed with the bank debentures of Rs. 3,60,000 as collateral security. Entry when Debentures issued as collateral security

A
Debenture suspense 360000
a/c Dr.
To 12 % Debenture a/c 360000

B
Debenture suspense 600000
a/c Dr.
To 12 % Debenture a/c 600000

C
Debenture suspense 500000
a/c Dr.
To 12 % Debenture a/c 500000

D
Debenture suspense 300000
a/c Dr.
To 12 % Debenture a/c 300000

Solution

When Debentures issued as Collateral security Debenture suspense account will be debited. Debenture Suspense account is an adjustment account which is prepared at the time of issue of debentures as collateral security. In this case, debentures act as a security for taking a loan from the lender.
Question 2
1 / -0

A building has been purchased for Rs.1,10,000 from X Ltd., X Ltd., has been issued 12% debentures in Purchase Consideration at a Premium of 10% Journalize the above transaction.

A
Building a/c Dr. 10000 To vendors a/c 10000

B
vendors a/c Dr. 11000
    To Building a/c 11000

C
Building a/c Dr. 110000
    To vendors a/c 11000
Vendor a/c Dr. 110000
    To 12% Debenture a/c 100000 To Securities Premium a/c 10000

D
Building a/c Dr. 10000
To vendors a/c 10000

Solution

When an asset is purchased from the vendor and debentures are issued for the same, following journal entry will take place at the time of purchase of asset:

No of debentures are calculated as 1,10,000 divided by 110 (100+10)=1000 debenture 100 each.
Question 3
1 / -0

A building has been purchased for Rs.1,10,000 from X Ltd., X Ltd., has been issued 12% debentures in Purchase Consideration at a Premium of 10% Journalize the above transaction.

A
Vendors a/c Dr. 110000
To 12% debentures holder a/c 150000
To securities premium a/c 10060

B
Vendors a/c Dr. 110000
To 12% debentures holder a/c 100000
    To securities premium a/c 10000

C
Building a/c Dr. 110000
  To vendors a/c 110000
Vendor a/c Dr. 110000
To 12% Debenture a/c 100000
To Securities Premium a/c 10000

D
Vendors a/c Dr. 120000
  To 12% debentures a/c 100000
  To securities premium a/c 20000

Solution

When the asset is purchased from the vendor and debentures are issued for the same, following journal entry will take place at the time of purchase of asset:

No of debentures are calculated as 1,10,000 divided by 110 (100+10)=1000 debenture 100 each.
Question 4
1 / -0

Vinod Electronics Ltd. purchased machinery for ₹198000 and issued 9% debentures of ₹100 each to the vendors. Make journal entries if the debentures were issued at a premium of ₹10.Vendor’s account should be debited by…….

A
₹189000

B
₹198000

C
₹150000

D
₹180000

Solution

Vendor’s Account should be debited with Rs.1,98,000 because the total amount due to him is Rs.1,98,000.
Question 5
1 / -0

Raghav Limited purchased a running business from Krishna traders for a sum of Rs. 15,00,000 payable Rs. 3,00,000 by cheque and for the balance issued 9% debentures of Rs. 100 each at par. The assets and liabilities consisted of the following: Plant and Machinery Rs. 4,00,000 Building Rs. 6,00,000 Stock Rs. 5,00,000 Debtors Rs. 3,00,000 Creditors Rs. 2,00,000. Journal entries in the books of Raghav Limited. for issue of debentures. Pass entry for issues of 12,000 debentures of Rs. 100 each at par and rest paid by a cheque.

A
Krishna Traders a/c Dr. 1500000
To Bank a/c 300000
To 9% Debentures a/c 1200000

B
Krishna Traders a/c Dr. 1500000
To Bank 200000
To 9% Debentures a/c 1300000

C
Krishna Traders a/c Dr. 1500000
To Bank 500000
To 9% Debentures a/c 1000000

D
Krishna Traders a/c Dr. 1500000
To Bank 300000
To Debentures holder a/c 1200000

Solution

Debentures Issued for Consideration Other than Cash: Sometimes, a company purchases a running business (assets and liabilities) and issues to the vendor, debentures as consideration. It is called the issue of debentures in consideration, other than cash.

Krishna Traders a/c Dr. 1500000
To Bank a/c 300000
To 9% Debentures a/c 1200000
Question 6
1 / -0

XYZ Co. Ltd., issued 10000 10% debentures of Rs.100 each at a premium of Rs.5 payable as follows On application Rs.40, on Allotment Rs.65 (including premium) All the debentures were subscribed and money was received, What journal entry is to be recorded at the time of allotment?

A
10% Deb allotment a/c Dr. 650000
To Debenture a/c 600000
To Discount a/c 50000

B
10% Deb allotment a/c Dr. 650000
To Debenture holder a/c & 600000
To Security Premium a/c 50000

C
10% Deb allotment a/c Dr. 650000
To Debenture a/c 500000
To Security Premium a/c 150000

D
10% Deb allotment a/c Dr. 650000
To Debenture a/c 600000
To Security Premium a/c 50000

Solution

Following Journal entry is to be recorded:
Securities premium will be credited at the time of allotment

10% Deb allotment a/c Dr. 650000
To Debenture a/c 600000
To Security Premium a/c 50000
Question 7
1 / -0

Shining India Ltd. issued 5000, 8% Debentures of Rs.100 each payable as Follows Rs.20 on Application Rs.30 on Allotment Rs.50 on First and Final call All the debentures were applied for and allotted. All the calls were duly received. What will be the journal entry of First and final call received.

A
Bank
A/c 3000000
Dr 300000
To Debentures First and Final call A/c

B
Bank
A/c 250000
Dr
To Debentures First and Final call A/c 250000
(being Debentures First and Final call money received)

C
Bank 500000
A/c Dr
To Debentures First and Final call A/c 50000

D
Bank A/c 5000000
Dr
To Debentures First and Final call A/c 500000
Dr

Solution

First and Final call money due on 5,000 Debentures:

Bank 250000
A/c Dr
To Debentures First and Final call A/c 250000
Question 8
1 / -0

X Co. Ltd., issued 10000, 10%. debentures of Rs.100 each at a premium of Rs. 5 payable as follows On application Rs. 40, on Allotment Rs. 65 (including premium) All the debentures were subscribed and money was received, What will be the first journal entry?

A
10% Deb Allotment a/c Dr. 400000
To 10% Debenture a/c 400000

B
10% Deb Application a/c Dr. 65000
To 10% Debenture a/c 65000

C
10% Deb Application a/c Dr. 400000
To 10% Debenture Application a/c 400000

D
Bank A/c Dr. 400000 To 10% Debenture Application a/c 400000

Solution

In the first entry Application money received and then in the second entry for transfer will be phased.

Bank a/c Dr. 400000
To 10% Debenture Application a/c 400000
Question 9
1 / -0

A company has issued 2000 9% debentures of ₹100 each at a discount of 10% payable as ₹40 on application ₹50 on allotment. Calculate amount of debenture discount

A
₹30000

B
₹40000

C
₹50000

D
₹20000

Solution

Amount of Discount to be debited ₹20,000
i.e. 2,000 × 10 = 20,000
Question 10
1 / -0

Debenture Allotment Account is:

A
Real Account

B
Personal Account

C
Nominal Account

D
None of these
Question 11
1 / -0

A company has issued 5000 10% Debentures of ₹100 each at a premium of 20% payable as ₹60 on application ₹60 on allotment (including premium) All the debentures were subscribed for and money was duly received. Calculate securities premium amount.

A
₹500000

B
₹100000

C
₹200000

D
₹600000

Solution

Amount of Securities premium ₹1,00,000 to be credited at the time of allotment. i.e. 5,000 × 20 = 1,00,000
Question 12
1 / -0

Debenture Application Account is:

A
Real Account

B
Personal Account

C
Nominal Account

D
None of these

Solution

Debenture Application Account is a personal account. It is Representative Personal Account.
Question 13
1 / -0

ABC Ltd issued 5000 10% Debentures of ₹100 each payable as ₹40 on application and ₹60 on allotment. Applications were received for 6000 debentures. Applicants for 500 debentures were sent letter of regret and money was returned. Allotment was made proportionately to the remaining applicants. Over subscription was applied to the amount due on allotment. All money was duly received. Calculate amount to be returned to the applicants

A
₹20000

B
₹50000

C
₹60000

D
₹24000

Solution

Amount to be returned to the applicants Rs.20,000 i.e.
No. of Debenture issued 5,000
Applications Rejected 500
Amount received on excess 500 applications = 500 x 40 = 20,000 which is to be returned now.
Question 14
1 / -0

ABC Ltd issued 5000 10% Debentures of ₹100 each payable as ₹40 on application and ₹60 on allotment. Applications were received for 6000 debentures. Applicants for 500 debentures were sent letter of regret and money was returned. Allotment was made proportionately to the remaining applicants. Over subscription was applied to the amount due on allotment. All money was duly received. By what amount Debentures Allotment A/c be credited while passing entry for allotment money received

A
₹280000

B
₹300000

C
₹270000

D
₹250000

Solution

Allotment will be credited with ₹3,00,000 i.e.
Allotment due ₹3,00,000
Already adjusted excess = 20,000
Allotment Received = 3,00,000 – 20,000 = 2,80,000
Question 15
1 / -0

ABC Ltd issued 5000 10% Debentures of ₹100 each payable as ₹40 on application and ₹60 on allotment. Applications were received for 6000 debentures. Applicants for 500 debentures were sent letter of regret and money was returned. Allotment was made proportionately to the remaining applicants. Over subscription was applied to the amount due on allotment. Give Journal entries for the above transactions for application money received

A
Bank A/c Dr 500000
To Debentures Application A/c 500000

B
Bank A/c Dr 600000
To Debentures Application A/c 600000

C
Bank A/c Dr 240000
To Debentures Application A/c 240000

D
Bank A/c Dr 400000
To Debentures Application A/c 400000

Solution

: Following Journal Entry will take place:

Bank A/c Dr 240000
To Debentures Application A/c 240000
Question 16
1 / -0

Which of the following is not a Personal Account?

A
Debenture Allotment A/c

B
Debenture Account

C
Debenture Application A/c

D
Assets Account

Solution

Following Accounts are personal accounts:
(a)Debenture Account
(b)Debenture Allotment Account
(c)Debenture Application Account
Note: Asset account is real account.
Question 17
1 / -0

Which of the following is correct?

A
Debentures cannot be issued at discount

B
Interest on debentures is paid before paying any dividend

C
Debentures cannot be issued as ‘Collateral Security’

D
Debentures can be issued in cash only

Solution

Interest on debentures is paid before paying any dividend. Following statement are false:
•Debentures cannot be issued as ‘Collateral Security’
•Debentures can be issued in cash only
•Debentures cannot be issued at discount
Question 18
1 / -0

XYZ Co. Ltd., issued 10000, 10% debentures of Rs.100 each at a premium of Rs.5 payable as follows On application Rs. 40, on Allotment Rs. 65 (including premium) All the debentures were subscribed and money was received, at the time of allotment Securities premium account is to be credited with…..

A
Rs.60,000

B
Rs.50,000

C
Rs.65,000

D
Rs.55,000

Solution

Rs.50 000
10,000 debentures X Premium amount Rs. 5= Rs. 50,000
Question 19
1 / -0

Raghav Limited purchased a running business from Krishna traders for a sum of ₹15,00,000 payable ₹3,00,000 by cheque and for the balance issued 9% debentures of ₹100 each at par. The assets and liabilities consisted of the following: Plant and Machinery ₹4, 00,000 Building ₹6, 00,000 Stock ₹5,00,000 Debtors ₹3, 00,000 Creditors ₹2,00,000.Calculate amount of capital reserve

A
₹200000

B
₹150000

C
₹100000

D
None of these

Solution

Amount of Capital Reserve = 1,00,000
Question 20
1 / -0

Vinod Limited issued 6000, 10% debentures of Rs.100 each to the bank as collateral security against a loan of Rs.5,00,000 taken from the bank. Record the issue of debentures in the books of the company.

A
Debentures Suspense A/c Dr 60000
To Debenture A/c 60000

B
Debentures Suspense A/c Dr 600000
To Debenture A/c 600000

C
Debentures Suspense A/c Dr 100000
To Debenture A/c 100000

D
Debentures Suspense A/c Dr 500000
To Debenture A/c 500000

Solution

A debenture Suspense account is an adjustment account which is prepared at the time of issue of debentures as collateral security. In this case, debentures act as a security for taking a loan from the lender.
The following entry will take place to record the bank loan taken against collateral security:

Debentures Suspense A/c Dr 600000
To Debentures A/c 600000
Question 21
1 / -0

Vinod Ltd. purchased machinery worth ₹5500072,000 and issued 12% debentures of ₹55000100 each at a discount of 4% in settlement of purchase price. Calculate No. of debentures issued.

A
750

B
710

C
700

D
720

Solution

No. of debentures to be issued to the vendor:
Issued price = 100 – 4 = 96
= 72,000/96 = 750
Question 22
1 / -0

Revaluation account is

A
Asset Account

B
Nominal Account

C
Real Account

D
Personal Account

Solution

Nature of revaluation is Nominal Account. Any account which is prepared to calculated the profit or loss is considered as a Nominal Account.
Question 23
1 / -0

Premium on Redemption of Debentures Account is:

A
Real Account

B
Nominal Account

C
Personal Account

D
None of these

Solution

Premium on Redemption of Debentures Account is a personal account. It is shown in the balance sheet (as premium due). Premium payable on redemption is treated as a loss and should be written off against the Statement of P/L.
Question 24
1 / -0

Shining India Ltd. issued 5000 8% Debentures of ₹100 each payable as Follows ₹20 on Application ₹30 on Allotment ₹50 on First and Final call All the debentures were applied for and allotted. All the calls were duly Received. By what amount Allotment money will be due?

A
₹100000

B
₹200000

C
₹250000

D
₹150000

Solution

Allotment money due on 5,000 Debentures: 5,000 x 30 = 1,50,000
Question 25
1 / -0

Shining India Ltd. issued 5000 8% Debentures of ₹100 each payable as Follows ₹20 on Application ₹30 on Allotment ₹50 on First and Final call All the debentures were applied for and allotted. All the calls were duly received. Calculate the amount for Debentures first and final call money made due @ ₹50 per debenture

A
₹300000

B
₹150000

C
₹250000

D
₹200000

Solution

First and Final call money due on 5,000 Debentures: 5,000 × 50 = 2,50,000

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Re-Attempt Weekly Quiz Competition

Accounting for Debentures Test - 7

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Accounting for Debentures Test - 7

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Question 1

Debenture suspense 360000a/c Dr. To 12 % Debenture a/c 360000

Debenture suspense 600000a/c Dr. To 12 % Debenture a/c 600000

Debenture suspense 500000a/c Dr. To 12 % Debenture a/c 500000

Debenture suspense 300000a/c Dr. To 12 % Debenture a/c 300000

Solution

Question 2

Building a/c Dr. 10000 To vendors a/c 10000

vendors a/c Dr. 11000 To Building a/c 11000

Building a/c Dr. 110000 To vendors a/c 11000Vendor a/c Dr. 110000 To 12% Debenture a/c 100000 To Securities Premium a/c 10000

Building a/c Dr. 10000 To vendors a/c 10000

Solution

Question 3

Vendors a/c Dr. 110000 To 12% debentures holder a/c 150000 To securities premium a/c 10060

Vendors a/c Dr. 110000 To 12% debentures holder a/c 100000 To securities premium a/c 10000

Building a/c Dr. 110000 To vendors a/c 110000Vendor a/c Dr. 110000 To 12% Debenture a/c 100000 To Securities Premium a/c 10000

Vendors a/c Dr. 120000 To 12% debentures a/c 100000 To securities premium a/c 20000

Solution

Question 4

₹189000

₹198000

₹150000

₹180000

Solution

Question 5

Krishna Traders a/c Dr. 1500000To Bank a/c 300000To 9% Debentures a/c 1200000

Krishna Traders a/c Dr. 1500000 To Bank 200000To 9% Debentures a/c 1300000

Krishna Traders a/c Dr. 1500000To Bank 500000To 9% Debentures a/c 1000000

Krishna Traders a/c Dr. 1500000To Bank 300000To Debentures holder a/c 1200000

Solution

Question 6

10% Deb allotment a/c Dr. 650000 To Debenture a/c 600000To Discount a/c 50000

10% Deb allotment a/c Dr. 650000 To Debenture holder a/c & 600000 To Security Premium a/c 50000

10% Deb allotment a/c Dr. 650000 To Debenture a/c 500000 To Security Premium a/c 150000

10% Deb allotment a/c Dr. 650000 To Debenture a/c 600000 To Security Premium a/c 50000

Solution

Question 7

BankA/c 3000000Dr 300000To Debentures First and Final call A/c

BankA/c 250000DrTo Debentures First and Final call A/c 250000(being Debentures First and Final call money received)

Bank 500000A/c DrTo Debentures First and Final call A/c 50000

Bank A/c 5000000 DrTo Debentures First and Final call A/c 500000 Dr

Solution

Question 8

10% Deb Allotment a/c Dr. 400000 To 10% Debenture a/c 400000

10% Deb Application a/c Dr. 65000 To 10% Debenture a/c 65000

10% Deb Application a/c Dr. 400000 To 10% Debenture Application a/c 400000

Bank A/c Dr. 400000 To 10% Debenture Application a/c 400000

Solution

Question 9

₹30000

₹40000

₹50000

₹20000

Solution

Question 10

Real Account

Personal Account

Nominal Account

None of these

Question 11

₹500000

₹100000

₹200000

₹600000

Solution

Question 12

Real Account

Personal Account

Nominal Account

None of these

Solution

Question 13

Debenture suspense 360000
a/c Dr.
To 12 % Debenture a/c 360000

Debenture suspense 600000
a/c Dr.
To 12 % Debenture a/c 600000

Debenture suspense 500000
a/c Dr.
To 12 % Debenture a/c 500000

Debenture suspense 300000
a/c Dr.
To 12 % Debenture a/c 300000

vendors a/c Dr. 11000
To Building a/c 11000

Building a/c Dr. 110000
To vendors a/c 11000
Vendor a/c Dr. 110000
To 12% Debenture a/c 100000 To Securities Premium a/c 10000

Building a/c Dr. 10000
To vendors a/c 10000

Vendors a/c Dr. 110000
To 12% debentures holder a/c 150000
To securities premium a/c 10060

Vendors a/c Dr. 110000
To 12% debentures holder a/c 100000
To securities premium a/c 10000

Building a/c Dr. 110000
To vendors a/c 110000
Vendor a/c Dr. 110000
To 12% Debenture a/c 100000
To Securities Premium a/c 10000

Vendors a/c Dr. 120000
To 12% debentures a/c 100000
To securities premium a/c 20000

Krishna Traders a/c Dr. 1500000
To Bank a/c 300000
To 9% Debentures a/c 1200000

Krishna Traders a/c Dr. 1500000
To Bank 200000
To 9% Debentures a/c 1300000

Krishna Traders a/c Dr. 1500000
To Bank 500000
To 9% Debentures a/c 1000000

Krishna Traders a/c Dr. 1500000
To Bank 300000
To Debentures holder a/c 1200000

10% Deb allotment a/c Dr. 650000
To Debenture a/c 600000
To Discount a/c 50000

10% Deb allotment a/c Dr. 650000
To Debenture holder a/c & 600000
To Security Premium a/c 50000

10% Deb allotment a/c Dr. 650000
To Debenture a/c 500000
To Security Premium a/c 150000

10% Deb allotment a/c Dr. 650000
To Debenture a/c 600000
To Security Premium a/c 50000

Bank
A/c 3000000
Dr 300000
To Debentures First and Final call A/c

Bank
A/c 250000
Dr
To Debentures First and Final call A/c 250000
(being Debentures First and Final call money received)

Bank 500000
A/c Dr
To Debentures First and Final call A/c 50000

Bank A/c 5000000
Dr
To Debentures First and Final call A/c 500000
Dr

10% Deb Allotment a/c Dr. 400000
To 10% Debenture a/c 400000

10% Deb Application a/c Dr. 65000
To 10% Debenture a/c 65000

10% Deb Application a/c Dr. 400000
To 10% Debenture Application a/c 400000

Bank A/c Dr 500000
To Debentures Application A/c 500000

Bank A/c Dr 600000
To Debentures Application A/c 600000

Bank A/c Dr 240000
To Debentures Application A/c 240000

Bank A/c Dr 400000
To Debentures Application A/c 400000

Debentures Suspense A/c Dr 60000
To Debenture A/c 60000

Debentures Suspense A/c Dr 600000
To Debenture A/c 600000

Debentures Suspense A/c Dr 100000
To Debenture A/c 100000

Debentures Suspense A/c Dr 500000
To Debenture A/c 500000