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Question
State to whether the following statement is True/False.
Premium on issue of debentures is recorded on the asset side of balance sheet.
Options
True
False
Solution
False
Explanation: The premium received on the issue of debentures represents the excess amount received over and above the face value of the debentures. It is a capital gain for the company. Therefore, it is shown on the Liabilities side of the Balance Sheet under the head "Reserves & Surplus".
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On 1.4.2015, MKM Ltd. issued 12,000, 11% debentures of `100 each at a discount of 8%, redeemable at a premium of 10% after three years. The company closes its books on 31st March every year. Interest on 11% debentures is payable on 30th September and 31st March every year. The rate of tax deducted at source is 10%.
Pass necessary journal entries for the issue of 11% debentures and debenture interest for the year ended 31.3.2016.
'Ananya Ltd' had an authorized capital of Rs 10,00,00,000 divided into 10,00,000 equity shares of Rs 100 each. The company had already issued 2,00,000 shares. The dividend paid per share for the year ended 31.3.2007 was Rs 30. The management decided to export its products to African countries. To meet the requirements of additional funds, the finance manager put up the following three alternate proposals before the Board of Directors:
(1) Issue 47,500 equity shares at a premium of Rs 100 per share.
(2) Obtain a long-term loan from the bank which was available at 12% per annum.
(3) Issue 9% debentures at a discount of 5%.
After evaluating these alternatives the company decided to issue 1,00,000, 9% debentures on 1.4.2008. The face value of each debenture was Rs 100. These debentures were redeemable in four installments starting from the end of the third year, which was as follows:
| Year | Rs |
| III | 10,00,000 |
| IV | 20,00,000 |
| V | 30,00,000 |
| VI | 40,00,000 |
Prepare 9% debenture account from 1.4.2008 till all the debentures were redeemed.
BBG Ltd. invited applications for issuing 2,00,000 equity shares of Rs 10 each at a premium of Rs 10 per share. The amount was payable as follows:
On Application − Rs 4 per share (including Rs 2 premium)
On Allotment − Rs 5 per share (including Rs 2 premium)
On First call − Rs 5 per share (including Rs 3 premium)
On Second and final call − Balance amount
The issue was fully subscribed. Raghu, a shareholder holding 1000 shares, failed to pay the allotment money and Rahim, another shareholder holding 1500 shares, paid his entire share money along with allotment. Raghu's shares were forfeited immediately after allotment. Afterwards, the first call was made Deenanath, a shareholder holding 500 shares, failed to pay the first call money and Dayal, a shareholder holding 600 shares, paid his second call money along with the first call. Deenanath's shares were forfeited immediately after the first call. Later on the second call was made which was duly received.
Pass necessary journal entries for the above transactions in the books of BBG Ltd.
Pass the necessary Journal entries of the issues and redemption of Debentures in the following cases:
(i) 10,000, 10% Debentures of Rs 120 each issued at 5% premium, repayable at par.
(ii) 20,000, 9% Debentures of Rs 200 each issued at 20% premium, repayable at 30% premium.
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Pass necessary Journal entries in the books of the company for the above transaction.
Pass necessary Journal entries for the following transaction in the books of Fortune Ltd:
(i) Redeemed Rs 96,000, 12% Debenture by conversion into Equity Shares of Rs 100 each. The
Equity Shares were issued at a discount 4%.
(ii) Converted 4,800, 12% Debentures of Rs 100 each into New 13% Debentures of Rs 100 each.
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DN Ltd. issued 50,000 shares of Rs 10 each at a discount of 10% payable as Rs 2 per share on application Rs 3 on allotment and Rs 2 each on first and final call. Applications were received for 70,000 shares. It was decided that
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(b) Allot 10,000 shares to Mohan who had applied for a similar number, and
(c) Allot the remaining share on a pro-rata basis.
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Answer in a sentence only.
What is meant by ‘Premium on Redemption of debentures?
Write one word/term/phrase which can substitute the following
The debentures where a charge is created on the assets of company.
Write one word/term/phrase which can substitute the following
The issue of debentures more than face value of debentures
Tanagi Ltd. issued Rs 10,000 12% debentures of Rs 100 each at a discount of 5% Payable as follows:
On Application Rs 40
On Allotment Rs 55
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Archana 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 (Premium included Rs. 10)
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Pass Journal entries and show how the amounts appear in Balance Sheet.
BGP Ltd. invited applications for issuing 15,000, 11% debentures of ₹ 100 each at a premium of ₹ 50 per debenture. The full amount was payable on application. Applications were received for 25,000 debentures. Applications for 5,000 debentures were rejected and the application money was refunded. Debentures were allotted to the remaining applicants on a pro-rata basis.
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On 1st April, 2012, Neptune Finance Company (a listed NBFC) issued 4,000, 9 % Debentures of ₹ 100 each to be redeemed at a premium of 5% on 31st March, 2021.
You are required to pass necessary journal entries for the issue and redemption of debentures.
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- Issued 5,000, 9% debentures of ₹ 100 each at a discount of 10% redeemable at a premium of 5% after 5 years.
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- Issued 8,750, 12% debentures of ₹100 each at par, redeemable at par after 5 years.
Which of the following statement is incorrect with respect to debentures?
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Chiranjeevi Limited issued 2,000, 10% debentures of ₹ 100 each. Pass the necessary Journal entries for the issue of debentures in the following cases:
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The following balances have been extracted from the books of Nirvana Ltd, as at 31st March, 2024:
| Particulars | (₹) | Particulars | (₹) |
| Security deposit for electricity for ten years | 30,000 | Uncalled amount on partly paid-up shares | 8,00,000 |
| Underwriting commission | 20,000 | 10% Debentures | 5,00,000 |
| General Reserve | 70,000 | Statement of P/L (Dr.) | 10,000 |
| Fixed Deposits | 2,00,000 | Calls-in arrears @ ₹ 1 per share | 40,000 |
| Premium on redemption of Debentures | 20,000 | Securities Premium | 2,00,000 |
| Equity Share Capital (1,00,000 shares of ₹ 10 each) |
10,00,000 |
You are required to show the above items in Notes to Accounts accompanying the Balance Sheet of Nirvana Ltd. prepared as per Schedule III of the Companies Act 2013 as at 31st March, 2024.
