Tag: issue of debentures at par, premium, discount, collateral security and for consideration other than cash

Questions Related to issue of debentures at par, premium, discount, collateral security and for consideration other than cash

Which debentures are secured by a charge -

book keeping and accountancy company accounts - issue of debentures issue of debentures for consideration other than cash types of debentures issue of debentures at par, premium, discount, collateral security and for consideration other than cash

  1. Debentures which are convertible on or after $18$ months

  2. Non - convertible debentures which are redeemable on or after $18$ months

  3. Debentures which are non - convertible on or after $18$ months

  4. None of these

Show answer
Correct Option: B
Explanation:

If debentures are non-convertible, they are paid at the time of redemption. Debentures which are non-convertible and redeemable after a period of more than 18 months must be secured by creating a charge against the property of the company.

In Balance Sheet of a Company, Interest accrued but not due on debentures appears under the head -

book keeping and accountancy company accounts - issue of debentures issue of debentures for consideration other than cash types of debentures issue of debentures at par, premium, discount, collateral security and for consideration other than cash

  1. Share Capital

  2. Reserves & Surplus

  3. Current Liabilities

  4. Non - Current Liabilities

Show answer
Correct Option: C

X Ltd. purchased land and building for Y. Ltd for a book value of Rs$4,00,000$. The consideration was paid by issue of $12\%$ Debentures of Rs$100$ each at a discount of $20\%$. The debentures account is credited with -

book keeping and accountancy company accounts - issue of debentures issue of debentures for consideration other than cash types of debentures issue of debentures at par, premium, discount, collateral security and for consideration other than cash

  1. $Rs 5,20,000$

  2. $Rs 5,00,000$

  3. $Rs 4,80,000$

  4. $Rs 3,20,000$

Show answer
Correct Option: B

Loss on Issue of Debentures Account is a -

book keeping and accountancy company accounts - issue of debentures issue of debentures for consideration other than cash types of debentures issue of debentures at par, premium, discount, collateral security and for consideration other than cash

  1. Personal Account

  2. Real Account

  3. Nominal Account

  4. None of these

Show answer
Correct Option: C

In the Balance Sheet of a company Debentures account appears under the head:

book keeping and accountancy company accounts - issue of debentures issue of debentures for consideration other than cash types of debentures issue of debentures at par, premium, discount, collateral security and for consideration other than cash

  1. Share Capital

  2. Reserves & Surplus

  3. Secured Loans

  4. Miscellaneous Expenditure

Show answer
Correct Option: C

The underwriting commission in case of issue of debentures can't exceed _______.

book keeping and accountancy company accounts - issue of debentures issue of debentures for consideration other than cash types of debentures issue of debentures at par, premium, discount, collateral security and for consideration other than cash

  1. $2\%$

  2. $2.5\%$

  3. $3\%$

  4. $5\%$

Show answer
Correct Option: B

Which of the following is false with respect to debentures?

book keeping and accountancy company accounts - issue of debentures issue of debentures for consideration other than cash types of debentures issue of debentures at par, premium, discount, collateral security and for consideration other than cash

  1. They can be issued for cash

  2. They can be issued for consideration other than cash

  3. They can be issued as collateral securities

  4. They can be issued in lieu of dividends

Show answer
Correct Option: D
Explanation:

Sometimes a company purchases assets from vendors and instead of making payment in cash issues debentures for consideration thereof, such issue of debenture is called as issued for consideration other than cash. e.g. Purchase of assets from the company by issuing debentures as consideration,  debentures issued in lieu of dividends.

When debenture are issued as collateral security, the final entry for recording the transaction in the books is _______.

book keeping and accountancy company accounts - issue of debentures issue of debentures for consideration other than cash types of debentures issue of debentures at par, premium, discount, collateral security and for consideration other than cash

  1. Credit debenture A/c. and Debit cash A/c.

  2. Debit debenture suspense A/c. and credit cash A/c.

  3. Debit debenture suspense A/c. and credit debenture A/c.

  4. Debit cash A/c. and credit loan A/c. for which security is given

Show answer
Correct Option: C
Explanation:

A collateral security may be defined as a subsidiary or secondary or additional security besides the primary security when a company obtains a loan or overdraft  from a bank or any other financial institutions. The final journal entry for recording this transaction is:


Debenture suspense A/c     Dr.
            To Debenture A/c

Which of the following is/are true with respect to debentures?

book keeping and accountancy company accounts - issue of debentures issue of debentures for consideration other than cash types of debentures issue of debentures at par, premium, discount, collateral security and for consideration other than cash

  1. They can be issued for cash.

  2. They can be issued for consideration other than cash.

  3. They cannot be issued as collateral securities.

  4. Both (A) and (B) above.

Show answer
Correct Option: D
Explanation:

Sometimes a company purchases assets from vendors and instead of making payment in cash issues debentures for consideration thereof, such issue of dentures is called as issue for consideration other than cash. Debenture can be issued for cash and collateral security.

Mohan Lai Ltd. purchased a plant for Rs. 20,000 payable Rs. 6,500 in cash and balance by issue of 9% debentures of Rs. 100 each at a primium of 10%. Find the number of debentures to be issued to the vendor.

book keeping and accountancy company accounts - issue of debentures issue of debentures for consideration other than cash types of debentures issue of debentures at par, premium, discount, collateral security and for consideration other than cash

  1. 125 of Rs. 100 each

  2. 123 of Rs. 100 each

  3. 112.50 of Rs. 100 each

  4. 143 of Rs. 100 each

Show answer
Correct Option: B