Issue and Redemption of Debentures Class 12 Accountancy Exam Questions

Please refer to Issue and Redemption of Debentures Class 12 Accountancy Exam Questions provided below. These questions and answers for Class 12 Accountancy have been designed based on the past trend of questions and important topics in your class 12 Accountancy books. You should go through all Class 12 Accountancy Important Questions provided by our teachers which will help you to get more marks in upcoming exams.

Class 12 Accountancy Exam Questions Issue and Redemption of Debentures

Class 12 Accountancy students should read and understand the important questions and answers provided below for Issue and Redemption of Debentures which will help them to understand all important and difficult topics.

SHORT ANSWER TYPE QUESTIONS :

Question. ABC Lmited issued Rs 10,000, 12% debentures of Rs 100 each payable Rs 30on application and remain-ing amount on allotment. The public applied for 9,000debentures which were fully allotted, and all the rele-vant allotment money was duly received. Give journal entries in the books of ABC Ltd., .
Answer : 

Question. Rai Company purchased assets of the book value of Rs 2,20,000 from another company and agreed to make the payment of purchase consideration by issuing 2,000, 10% debentures of Rs 100 each at a premium of 10%. Record necessary journal entries.
Answer :                         Books of Rai Company Limited
Sundry Assets A/c Dr. 2,20,000
To Vendors 2,20,000
(Assets purchased from vendors)
Vendors Dr. 2,20,000
To 10% Debentures A/c 2,00,000
To Securities Premium A/c 20,000
(Allotment of 2,000 debentures of Rs 100 each at a premium of 10% as purchase consideration)

Question. Give journal entries for the issue of debentures in the following conditions.
A) Issued 2,000, 12% debentures of Rs. 100 each at a discount of 2%, redeemable atpar.
B) Issued 2,000, 12% debentures of Rs. 100 each at a premium of 5%, redeemable at a premium of10%.
Answer : A) Bank a/c     Dr.     1,96,000
                   To 12% debentures application & allotment a/c  196,000
                  (Application money received)
B) 12% debentures application &allotment a/c    Dr.     1,96,000
       Discount on issue of debentures a/ c            Dr.    4,000
            To 12% debentures a/c                                                       2,00,000
(Transfer of application money to debentures a/c, issued at a discount of 2%)
b) Bank a/c     Dr.                      2,10,000
To 12% debentures application & allotment a/c      2,10,000
(application money received)
12% debentures application &allotment a/c Dr.              2,10,000
Loss on issue of debentures a/c Dr.
  To 12% debentures a/c                                                                        20,000
  To Securities premium reserve a/c                                                        10,000
  To premium on redemption a/c                                                             20,000
  To 12% debentures a/c                                                                        2,00,000
(transfer of application money to debentures a/c, issued at a premium of 5% and redeema-ble at a premium of 10%)

Question. Complete the following journal entries.

Answer : Goodwill a/c Dr   1,00,000
Discount on issue of Debentures A/c Dr   2,00,000
To bills payable A/c                                                         20,000
To Debenture A/C                                                           3,80,000

Question. A Limited took over the assets of Rs 3,00,000 and liabilities of Rs 10,000 from B & Co. Ltd. for an agreed purchase consideration of Rs 2,70,000 to be satisfied by issue of 15% debentures of Rs 100 at 20% premium. Show the journal entries in the journal of A Limited.
Answer :                    Books of A Limited
Sundry Assets A/c Dr. 3,00,000
To Sundry Liabilities A/c 10,000
To B & Co. Ltd. 2,70,000
To Capital Reserve 20,000
(Purchased assets and took over liabilities from B Ltd.)
B & Co. Ltd. Dr. 2,70,000
To 15% Debentures A/c 2,25,000
To Securities Premium A/c 45,000
(Issue of 2,250 debentures of Rs 100 each at a
premium of 20%)

Question. Aashirward Company Limited purchased assets of the book value of Rs 2,00,000 from another company and agreed to make the payment of purchase consideration by issuing 2,000, 10% debentures of Rs 100 each. Record the necessary journal entries.
Answer : Sundry Assets A/c Dr. 2,00,000
To Vendors 2,00,000
(Assets purchased from vendors)
Vendors Dr. 2,00,000
To 10% Debentures A/c 2,00,000
(allotment of debentures to vendors as
purchase consideration)

Question. A company took a loan of Rs. 10,00,000 from Punjab National Bank and issued 10% debentures of Rs. 12,00,000 of Rs. 100 each as a collateral security. Explain how you will deal with the issue of debentures in the books of the company. 
Answer :

Question. TV Components Ltd., issued 10,000, 12% debentures of Rs 100 each at a discount of 5% payable as follows:
On application Rs 40
On allotment Rs 55
Show the journal entries including those for cash, assuming that all the instalments were duly collected.
Answer :         Books of TV Components Ltd.
Bank A/c Dr. 4,00,000
To 12% Debenture Application A/c 4,00,000
(Receipt of application money @ Rs 30 per debenture)
12% Debenture Application A/c Dr. 4,00,000
To 12% Debenture A/c 4,00,000
(Transfer of application money to debenture account)
12% Debenture Allotment A/c Dr. 5,50,000
Discount on Issue of Debentures A/c 50,000
To 12% Debenture A/c 6,00,000
(Allotment money due on debentures)
Bank A/c Dr. 5,50,000
To 12% Debenture Allotment A/c 5,50,000
(Receipt of allotment money on debentures)

Question. National Packaging Company purchased assets of the value of Rs 1,90,000 from another company and agreed to make the payment of purchase consideration by issuing 2,000, 10% debentures of Rs 100 each at a discount of 5%. Record necessary journal entries.
Answer : Sundry Assets A/c Dr.            1,90,000
To Vendors                                                       1,90,000
(Assets purchased from vendors)
Vendors Dr.                                                      1,90,000
Discount on Issue of Debenture A/c Dr.              10,000
To 10% Debentures A/c                                                  2,00,000
(Allotment of 2,000 debentures of Rs 100 each at a discount of 5% as purchase considera-tion)

Question. Name the head under which “discount on issue of debentures “ appears in the Balance sheet of a company.
Answer : Current assets and sub-head other current assets

Question. XYZ Industries Ltd., issued 2,000, 10% debentures of Rs 100 each, at a premium of Rs 10 per debenture payable as follows:
On application Rs 50
On allotment Rs 60
The debentures were fully subscribed and all money was duly received.
Record the journal entries in the books of a company
Answer :              Books of XYZ Industries Limited
Bank A/c Dr. 1,00,000
To 10% Debenture Application A/c 1,00,000
(Application money Rs 50 per debentures received)
10% Debenture Application A/c Dr. 1,00,000
To 10% Debentures A/c 1,00,000
(Transfer of application money )
10% Debenture Allotment A/c Dr. 1,20,000
To 10% Debentures A/c 1,00,000
To Securities Premium A/c 20,000
(Allotment money due on debentures including the premium)
Bank A/c Dr. 1,20,000
To 10% Debenture Allotment A/c 1,20,000
(Allotment money received)

LONG ANSWER TYPE QUESTIONS :

Question. Star Ltd. took over the assets of ₹ 6,60,000 and liabilities of ₹ 80,000 of Moon Ltd. for ₹ 6,00,000. Give necessary Journal entries in the books of Star Ltd. assuming that:
Case (a): The purchase consideration was payable 10% in cash and the balance in 5,400; 12% Debentures of ₹ 100 each.
Case (b): The purchase consideration was payable 10% in cash and the balance in 4,500; 12% Debentures of ₹ 100 each issued at 20% premium.
Answer :

Question. XYZ Industries Ltd., issued 2,000, 10% debentures of Rs 100 each, at a premium of Rs 10 per debenture payable as follows:
On application Rs 50
On allotment Rs 60
The debentures were fully subscribed and all money was duly received.
Record the journal entries in the books of a company.
Answer : Bank A/c Dr. 1,00,000
                            To 10% Debenture Application A/c 1,00,000
(Application money Rs 50 per debentures received)
10% Debenture Application A/c Dr. 1,00,000
        To 10% Debentures A/c 1,00,000
(Transfer of application money )
10% Debenture Allotment A/c Dr. 1,20,000
              To 10% Debentures A/c 1,00,000
              To Securities Premium A/c 20,000
(Allotment money due on debentures including the premium)
Bank A/c Dr. 1,20,000
              To 10% Debenture Allotment A/c 1,20,000
(Allotment money received)

Question. Blue Prints Ltd., purchased building worth Rs 1,50,000, machinery worth Rs 1,40,000 and furniture worth Rs 10,000 from XYZ Co., and took over its liabilities of Rs 20,000 for a purchase consideration of Rs 3,15,000. Blue Prints Ltd., paid the purchase consideration by issuing 12% debentures of Rs 100 each at a premium of 5%. Record necessary journal entries.
Answer : Building A/c Dr. 1,50,000
Plant & Machinery A/c Dr. 1,40,000
Furniture A/c Dr. 10,000
Goodwill A/c 1 Dr. 35,000
To Liabilities (Sundry) 20,000
To XYZ Co. 3,15,000
(Purchase of assets and taking over of liabilities of XYZ Co.)
XYZ Co. Dr. 3,15,000
To 12% Debentures A/c 3,00,000
To Securities Premium A/c 15,000
(Issue of 3,000 debentures at a premium of 5%)
Note: 1. Since the purchase consideration is more than net assets taken over, the
difference has been debited to goodwill account.
2. No. of debentures issued = Purchase Consideration
Issue Price of a Debenture
= Rs 3,15,000/105 = 3,000

Question. X Limited Issued 10,000, 12% debentures of Rs. 100 each payable Rs. 40 on application and Rs. 60 on allotment. The public applied for 14,000 debentures. Applications for 9,000 debentures were accepted in full; applications for 2,000 debentures were allotted 1,000 debentures and the remaining applications, were rejected. All money was duly received. Journalise the transactions.
Answer : 

Question. Pass the necessary journal entries for the issue of 7,500,9% Debenture of Rs. 50 each at discount of 6%, redeemable at premium of 10%.
Answer : (i) Bank A/c Dr Rs. 3,52,000
To Debenture Application and Allotment A/c          Rs. 3,52,000
(being application received)
(ii)Debenture Application and Allotment A/c       Dr  Rs. 3,52,000
Discount of issue of Debenture A/c                  Dr      Rs. 22,500
Loss on issue of Debenture A/c                      Dr       Rs. 37,500
To 9% Debenture A/c                                                               Rs. 3,75,000
To premium on rebemption of Debenture A/c                              Rs. 37,500
(being allotment issued at discount…) 

Question. Wellbeing Ltd. took over assets of ₹ 9,80,000 and liabilities of ₹ 40,000 of HDR Ltd. at an agreed value of ₹ 9,00,000. Wellbeing Ltd. paid to HDR Ltd. by issue of 9% Debentures of ₹ 100 each at a premium of 20%. Pass necessary Journal entries to record the above transactions in the books of Wellbeing Ltd.
Answer :

Question. Y Ltd. issued Rs. 2,00,000, 10% Debentures at a discount of 5% .The terms of issue provide the repayment at the end of 4 years . Y Ltd. has a balance of Rs. 5, 00,000 in Securities Premium Reserve. The company decided to write off discount on issue of debentures from Securities Premium Reserve in the first year.
Pass the journal entry.
Answer :                                                                  Debit Rs.             Credit Rs.
Securities Premium Reserve A/c                              Dr  10,000
To Discount on issue of debentures A/c                                                 10,000
(Being Discount on issue of debentures written off)
Note: Discount on issue of Debentures = 2, 00,000×5% = Rs 10,000

Question. On 1st April, 2017, S Ltd. issued 6,000, 8% Debentures of nominal (face) value of Rs. 100 each redeema-ble at 5% premium in equal proportions at the end of 5, 10 and 15 year It has a balance of Rs. 10,000 in Securities Premium Reserve.
Pass Journal entries. Also give Journal entry for writing off Loss on Issue of Debentures.
Answer : Date Particulars LF                              Debit Rs.                               Credit Rs.
2017
Apr1 Bank A/c                                                  6,00,000
To Debenture Application &Allotment A/c                                                             6,00,000
(Being application money received)
Apr 1 Debenture Application &Allotment A/c      6,00,000
Loss on issue of debentures A/c                           30,000
To 9% Debentures A/c                                                                                        6,00,000
To Premium on redemption of Debentures                                                             30,000
(Being application money transferred)
2018 Securities Premium Reserve A/c                  10,000
Statement of Profit &Loss A/c                              20,000
To Loss on issue of debentures A/c                                                                        30,000
(Being Loss on issue of debentures written off)