Tag: methods of redemption of debentures

Questions Related to methods of redemption of debentures

Debentures premium cannot be used to ____________.

book keeping and accountancy company accounts - redemption of debentures debentures redemption methods of redemption of debentures accounting effects for redemption of debentures

  1. write off the discount on issue of shares or debentures

  2. write off the premium on redemption of shares or debentures

  3. pay dividends

  4. write off capital loss

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Correct Option: C

Capital redemption reserve account is prepared when ___________.

book keeping and accountancy company accounts - redemption of debentures debentures redemption methods of redemption of debentures accounting effects for redemption of debentures

  1. redemption is done out of issue of fresh shares

  2. redemption is done out of profits of the company

  3. redemption is done through company's capital fund

  4. All of the above

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Correct Option: B

Which of the following statements is false?

book keeping and accountancy company accounts - redemption of debentures debentures redemption methods of redemption of debentures accounting effects for redemption of debentures

  1. Debenture is a form of borrowing fro public

  2. Normal rate of interest on debentures is specified on issue

  3. Debenture interest is a charge against profits

  4. The issue price and redemption value of debentures will always be equal

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Correct Option: D

Debenture Premium Account is a -

book keeping and accountancy company accounts - redemption of debentures debentures redemption methods of redemption of debentures accounting effects for redemption of debentures

  1. Personal Account

  2. Real Account

  3. Nominal Account

  4. None of these

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Correct Option: C

From the point of view of tenure, the debentures are classified as -

book keeping and accountancy company accounts - redemption of debentures debentures redemption methods of redemption of debentures accounting effects for redemption of debentures

  1. Secured and unsecured Debentures

  2. Redeemable Debentures and Irredeemable Debentures

  3. Convertible Debentures and Non-convertible Debentures

  4. Registered Debentures and Bearer Debentures

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Correct Option: B

Convertible Debentures are those debentures which are -

book keeping and accountancy company accounts - redemption of debentures debentures redemption methods of redemption of debentures accounting effects for redemption of debentures

  1. convertible into equity only at the point of debenture holders.

  2. convertible into equity shares only at the option of company only.

  3. convertible into equity shares only at the option of debenture holders or company.

  4. convertible into any securities at the option of debenture holders or company.

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Correct Option: D
Explanation:

A convertible debenture is a type of long-term debt issued by a company that can be converted into stock after a specified period. Convertible debentures are usually unsecured bonds or loans meaning that there is no underlying collateral connected to the debt.

In the Balance Sheet of a company, Debenture Premium Account appears under the head:

book keeping and accountancy company accounts - redemption of debentures debentures redemption methods of redemption of debentures accounting effects for redemption of debentures

  1. Share Capital

  2. Reserves & Surplus

  3. Non-Current Liabilities

  4. Current Liabilities

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Correct Option: B

From the point of view of mode of Redemption, the debentures are classified as -

book keeping and accountancy company accounts - redemption of debentures debentures redemption methods of redemption of debentures accounting effects for redemption of debentures

  1. Secured and unsecured Debentures

  2. Redeemable Debentures and Irredeemable Debentures

  3. Convertible Debentures and Non-convertible Debentures

  4. Registered Debentures and Bearer Debentures

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Correct Option: C

Debenture Redemption Premium Account is a -

book keeping and accountancy company accounts - redemption of debentures debentures redemption methods of redemption of debentures accounting effects for redemption of debentures

  1. Personal Account

  2. Real Account

  3. Nominal Account

  4. None of these

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Correct Option: A
Explanation:

Premium on redemption of debentures is a personal account and it is a liability of the company which is payable on redemption.

X Ltd issues $500, 15\%$ Debentures of Rs$100$ each on $1st$ May at a discount of $10\%$ redeemable at a premium of $5\%$ after $4$ years. Interest was payable half yearly on $30th$ June and $31st$ December. The amount of interest accrued but not due to be shown in the balance sheet as at $31st$ March is-

book keeping and accountancy company accounts - redemption of debentures debentures redemption methods of redemption of debentures accounting effects for redemption of debentures

  1. Rs$1,250$

  2. Rs$1,875$

  3. Rs$3,750$

  4. Rs$5,000$

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Correct Option: B