Advertisements
Advertisements
Question
Jain Motors Ltd. converted its 200, 8% debentures of Rs 100 each issued at a discount of 6% into equity shares of Rs 10 each, issued at a premium of 25%. Discount on issue of 8% debentures has not yet been written off.
Showing your working notes clearly pass necessary Journal Entries on conversion of 8% debentures into equity shares.
Solution
|
Journal |
|||||
|
Date |
Particulars |
L.F. |
Debit Amount (Rs) |
Credit Amount (Rs) |
|
|
|
8% Debentures A/c |
Dr. |
|
20,000 |
|
|
|
To Debentureholders’ A/c |
|
|
20,000 |
|
|
|
(200, 8% Debentures due for redemption) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Debentureholders’ A/c |
Dr. |
|
20,000 |
|
|
|
To Equity Share Capital A/c (1,600 × 10) |
|
|
16,000 |
|
|
|
To Securities Premium A/c (1,600 × 2.50) |
|
|
4,000 |
|
|
|
(200, 8% Debentures redeemed by converting into 1,600 equity shares of Rs 10 each issued at a premium of 25%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities Premium A/c |
Dr. |
|
1,200 |
|
|
|
To Discount on Issue of Debentures A/c |
|
|
1,200 |
|
|
|
(Discount on issue of debentures written off against balance in securities premium account) |
|
|||
Notes
`"No. of Equity Shares" ="Amount Payble" /"Issue Price"`
=`(20,000)/12.5=1,600`
RELATED QUESTIONS
Preference shares carry dividend at .......................... rate.
- Fixed
- Fluctuating
- Lower
Equity Shares and Preference Shares.
The bonds on which rate of interest remains constant throughout the life of the bond.
Write notes on Features of equity shares.
Write a word or terrn or phrase which can substitute each of
the following statements:
The value of share which is determined by demand and supply forces in the share market.
Select the proper option from the option given below and rewrite the sentences:
If a share of 100 is issued at 110. It is said to be issued at ___________.
Match the correct pairs.
| Group A | Group B | ||
| a) | Equity share capital | 1) | Link between depository and investor. |
| b) | Transfer of shares | 2) | Redeemable capital. |
| c) | Depository participant | 3) | Optimistic about rise in prices of securities. |
| d) | Bonus share | 4) | Conversion into equity shares. |
| e) | Bear | 5) | Capitalisation of profit. |
| 6) | Sale or gift of shares to another person. | ||
| 7) | Pessimistic about fall in prices of securities. | ||
| 8) | Permanent capital | ||
| 9) | Transfer of shares by operation of law. | ||
| 10) | Link between SEBI and depository. |
Write a word or term or phrase which can substitute each of the following statements:
The use of borrowed capital for financing a business firm.
Write a word or term or phrase which can substitute each of the following statements:
Type of preference shares which can be redeemed after a certain period of time.
Equity shares are paid dividend at ____________ rate.
A company must issue __________ shares.
Fully convertible debentures are converted into __________ shares on maturity.
Software solution India Ltd inviting application for 20,000 equity share of Rs 100 each, payable Rs 40 on application, Rs 30 on allotment and Rs 30 on call. The company received applications for 32,000 shares. Application for 2,000 shares were rejected and money returned to Applicants. Applications for 10,000 shares were accepted in full and applicants for 20,000 share allotted half of the number of share applied and excess application money adjusted into allotment. All money received due on allotment and call. Prepare journal and cash book.
A limited company offered for subscription of 1,00,000 equity shares of Rs 10 each at a premium of Rs 2 per share. 2,00,000. 10% Preference shares of Rs 10 each at par. The amount on share was payable as under :
|
|
Equity Shares |
Preference Shares |
|
On Application |
Rs 3 per share |
Rs 3 per share |
|
On Allotment |
Rs 5 per share |
Rs 4 per share |
|
|
(including a premium) |
|
|
On First Call |
Rs 4 per share |
Rs 3 per share |
All the shares were fully subscribed, called-up and paid. Record these transactions in the journal and cash book of the company:
2,000 Equity Shares of ₹ 10 each were issued to Limited from whom assets of ₹ 25,000 were acquired .
Pass Journal entry.
Jain Ltd purchased machinery costing ₹ 10,00,000 from Ayer Ltd. 50% of the payment was made by cheque and for the remaining 50% , the company issued Equity Shares of ₹ 100 each at a premium of 25% . Pass necessary Journal entries in the books of Jain Ltd . for the above transaction.
Light Lamps Ltd. issued 50,000 shares of ₹ 10 each as fully paid-up to the promoters for their services to set-up the company . It also issued 2,000 shares of ₹ 10 each credited as fully paid-up to the underwriters of shares for their services . journalise these transactions.
Sandesh Ltd. took over the assets of ₹ 7,00,000 and liabilities of ₹ 2,00,000 from Sanchar Ltd. for a purchase consideration of ₹ 4,59,500. ₹ 8,500 were paid by accepting a draft in favour of Sanchar Ltd. payable after three months and the balance was paid by issue of equity shares of ₹ 10 each at a premium of 10% in favour of Sanchar Ltd.
Pass necessary journal entries for the above transactions in the books of Sandesh Ltd.
Ankit Ltd. issued 20,000 equity shares of 10 each at a premium of ₹ 2 per share, payable as:
| On Application | : | ₹ 3 |
| On Allotment | : | ₹ 5 (including premium) |
| On First Call | : | ₹ 2 |
| On Second and Final Call | : | ₹ 2 |
Vijay was allotted 500 shares. Pass the necessary Journal entries relating to the forfeiture of shares in following cases.
| Case I | Vijay did not pay allotment money and his shares were immediately forfeited. |
| Case II | Vijay did not pay allotment and first call, his shares were forfeited after first call. |
| Case III | Vijay failed to pay first call and his shares were forfeited immediately. |
| Case IV | Vijay failed to pay both the calls and his shares were forfeited. |
SHARE STOCK
Equity shares and Preference shares.
Explain the features of preference shares.
Answer the question.
Explain the advantages of equity shares, as a source of finance.
Explain any three disadvantages of issuing equity shares, from the Company's point of view.
Distinguish between equity shares and preference shares.
Which of the following statement is incorrect about Preference Shares?
As per the Companies Act, 2013, companies cannot issue ______.
Which is not true about Preference Shares?
From the following Balance Sheets of Vinayak Ltd. as of 31st March 2021, Prepare a Common-size Balance Sheet.
| Vinayak Ltd. Balance Sheet as of 31st March, 2021 | |||
| Particulars | Note no. | 31.3.2021 (₹) | 31.3.2020 (₹) |
| I EQUITY AND LIABILITIES | |||
| 1. Shareholder’s Funds: | |||
| a. Share Capital | 30,50,000 | 20,00,000 | |
| b. Reserve and Surplus | 2,80,000 | 6,00,000 | |
| 2. Current Liabilities: | |||
| a. Trade Payable | 6,70,000 | 4,00,000 | |
| Total | 40,00,000 | 30,00,000 | |
| II ASSETS | |||
| 1. Non-Current Assets: | |||
| a. Fixed Assets: | |||
| i. Tangible Assets | 16,00,000 | 12,00,000 | |
| ii. Intangible Assets | 2,00,000 | 3,00,000 | |
| 2. Current Assets | |||
| a. Inventories | 8,00,000 | 3,00,000 | |
| b. Trade Receivables | 12,00,000 | 10,00,000 | |
| c. Cash and Cash Equivalents | 2,00,000 | 2,00,000 | |
| Total | 40,00,000 | 30,00,000 | |
What are preference shares?
Anjum is a first-time investor wanting to invest 10 lakhs in long term capital appreciation. She is willing to take risks in return for high growth.
Which type of security should she invest in? Suggest any four features of this type of security.
