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Question
Young India Ltd. had issued following debentures:
(a) 1,00,000, 10% fully convertible debentures of ₹ 100 each on 1st April, 2016 redeemable by conversion after 5 years.
(b) 20,000, 10% Debentures of ₹ 100 each redeemable after 4 years , 25% Debentures in Cash and 75% by conversion.
State the amount of DRR required to be created as per the Companies Act,2013.
Solution
(a) There is no need for creation of DRR because these debentures are fully convertible.
(b) DRR would be created for non-convertible part of debentures.
Amount required to be transferred to DRR
= 25 % of Face value of Debentures (Non- convertible)
= 25 % of Rs 500000 (2000000 × 25 %) = ₹ 125000
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RELATED QUESTIONS
Pass necessary journal entries in the following cases :
i. Z Ltd redeemed 1500, 12% debentures of Rs.100 each issued at a discount of 6% by converting them into equity shares of Rs.100 each issued at a premium of Rs.25 per share.
ii. X Ltd. converted 1,000, 12% debentures of Rs.100 each issued at a discount of Rs.10 per debenture into equity shares of Rs.100 each Rs.90 paid up.
'Chennai Fibers Limited' was registered with an authorized capital of Rs 40,00,000 divided into 4,00,000 equity shares of Rs 10 each. The company had issued 1,00,000 shares and the dividend paid per share was Rs 3 for the year 2007 - 08. The management of the company decided to export its readymade apparels to European countries. To meet the requirement of additional funds, the finance manager put up before the Board of Directors the following three alternative proposals :
(1) An issue of 1,54,000 equity shares at par.
(2) Obtain a loan of Rs 15,40,000 from a financial institution for a period of 5 years. The loan was
available @ 12% per annum.
(3) Issue 16,000, 9% debentures of Rs 100 each at a discount of 10% redeemable in instalments at the end of the third, fourth, fifth and sixth year as per details are given below :
| Year | Amount (Rs) |
| III | 2,00,000 |
| IV | 3,00,000 |
| V | 4,00,000 |
| VI | 7,00,000 |
After Comparing the alternatives, the company decided in favour of the third alternative and issued debentures on 1.4.2008.
Prepare 9% debentures to account for the years 2008-09 to 2013-14.
