TOPIC:- DEBENTURES
Q1:Explain any two methods of redemption of debentures.
Q2:Give any two important provisions of the Companies Act, 2013 relating to Debenture Redemption Reserve (DRR).
Q3:What doyou understand by ‘Redemption of Debentures by Purchase from Open Market?
Q4:X Ltd. had10,00,000, 9% debentures due to be redeemed out of profits on 1st October, 2016 at a premium of 5%. The company had a Debenture Redemption Reserve of Rs 1,50,000. Pass necessary journal entries at the time of redemption.
Q5:X Ltd.has issued Rs 8,00,000, 9% debentures due to be redeemed out of profits on 1st October. 2016 at apremium of 5%. The company had a debenture redemption reserve of Rs 4,14,000.
Pass necessary journal entries at the time of redemption.
Q6:F Ltd. issuedRs 1,00,000; 15% Debentures of Rs 100 each at a premium of 5%, redeemable at a
premium of10% at the end of 4 years. The Board of Directors decided to transfer the minimum required amountto Debenture Redemption Reserve Account at the time of redemption. Pass Journal entries at the time of Redemption of Debentures.
Q7:On 1st Jan.,2007 a Public Limited Company issued 5,000, 10% Debentures of ^ 100 each at par which wererepayable at a Premium of 10% on 31st December, 2011. On the date of maturity, company decided to redeem the above mentioned 10% Debentures as per the terms of issue, out of profits. TheStatement of Profit and Loss shows a credit balance of ^6,00,000 on this date. The offer was acceptedby all the Debentureholders and all the Debentures were redeemed.
Pass the necessaryjournal entries in the books of the Company only for the redemption of debentures.
Q8:AFCONs IndiaLtd., a banking company issued 50,00,000, 9% Debentures of Rs 20 each on April 1, 2012 redeemableon April 1, 2016. How much amount of Debenture Redemption Reserve is requiredbefore the redemption of debentures? Also record journal entries for issue and redemption of debentures.
Q9:Pass necessary Journal entries for issue and redemption of Debentures in the following cases: 10,000; 12% Debentures of Rs 50 each were issued and to be redeemed as follows:
(i)Issued at par and redeemed at a premium of 10%.
(ii)Issued at a premium of 10% and redeemable at a premium of 20%.
Q10:Radhika Ltd. issued 5,00,000, 7% Debentures of Rs 100 each at par on Oct. 1,2014 redeemable on Sept. 30,2016. The board of directors transferred the required amount to Debenture Redemption Reserve on March 31, 2016. Debentures were redeemed on due date. Record necessary entries for issue and redemption of debentures.
Q11:Assam Tea Ltd. issued Rs 6,00,00,000,7% Debentures divided into debentures of Rs 100 each on April 1,2013, redeemable in four equal annual instalments starting from April 1, 2016. The board of directors have decided to create Debenture Redemption Reserve of Rs 40,00,000 on March 31,2014; Rs 40,00,000 on March 31, 2015 and the balance on March 31, 2016. Record necessary journal
Q12:Suresh Ltd., on 1st April, 2009 acquired assets of the value of Rs 6,00,000 and liabilitiesfrom Rs 70,000 from P Co., at an agreed value of Rs 5,50,000. Suresh Ltd. issued 12% Debentures of Rs 100 each at a premium of 10% in full satisfaction of purchase consideration. The Debentures were redeemable 3 years later at a premium of 5%. Pass journal entries to record the above for redemption of debentures
Q13:Pure Water Ltd. issued 1,500, 14% Debentures of Rs 100 each on 1st April. 20 13. On 31st March 2014 the company purchased Rs50,000debentures at Rs 98 each from the open market for immediate cancellation. Give journal entries and show the debentures in the company’s Balance Sheet.
Q14:A company has 5,000, 12% Debentures of ?100 each outstanding. The interest is payable half yearly
On 31st March and 30th September each year. It decides to redeem 800 debentures out of profits by purchase of500 debentures in the open market at 95% and 300 debentures by draw oflots on IstOctober,20l5 Give journal entries in the books of the company.
Q15:On 1st January, 2013 a company made an issue of 1,000, 12% Debentures of Rs1,000 each at Rs 900 per debenture. The terms of issue provided for the redemption of Rs 20,000 debentures every year commencing from 2014 either by purchase or drawings at par at the company’s option.
On 31 st December, 2014 the company purchased for cancellation debentures of the face value of Rs 8,000 at Rs 950 per debenture and of12,000 at Rs 900 per debenture. j
Journalise the above transactions and show how the profit on redemption would be treated?
Q16:Bombay Cotton Ltd. has an outstanding balance of 50,00,000, 9% Debentures ofRs 100 eachand sufficient funds in Debenture Redemption Reserve to meet legal requirements. The Board Directors decided to purchase 4,00,000 debentures at a price ofRs 94 for investment purpose. But after few months they took decision to sell them @ Rs 97 in the market. Record necessary journal entry to show above transactions.
Q17:Zee Ltd. had Rs 5,00,000, 10% Debentures outstanding on 1st April, 2015. On the same datefl company purchased Rs 1,00,000 own debentures at 98% as investment from the open market. Pass journal entries if the debentures purchased from open market were cancelled on 31st March “I (Ignore interest)
Q18:Pass the necessary journal entries for the issue and redemption of debentures in the for cases:
(i)15,000, 10% Debentures of ?100 each issued at 10% premium, repayable at par
(ii)6,00,000, 12% Debentures of ?500 each issued at 5% premium, repayable at l0% Premium.
Q19:Ananya Ltd.’ had an authorised capital of Rs 10,00,00,000 divided into 10,00,000 equity shares Rs 100 each. The company had already issued 2,00,000 shares. The dividend paid per share for t year ended 31st March, 2007 was Rs 30. The management decided to export its products to Afric countries. To meet the requirements of additional funds, the finance manager put up the following three alternate proposals. Record the necessary Journal entries in the books of the company for the Issue and Redemption of Debentures.
Q20:Shyam Ltd. converted 450,10% Debentures of Rs 100 each into Equity Shares of Rs 100 each. The 10% Debentures were redeemable at 10% premium and the Equity Shares were issued at 25% premium.Pass the necessary Journal entries for the redemption of the above mentioned Debentures in the books of Shyam Ltd.
Q21:J Ltd. converted its 1,000; 9% Debentures of Rs 10.0 each into Equity Shares of Rs 10 each. The Debentures were issued at a premium of Rs 10 per Debenture and the Equity shares were issued at a premium of Rs 2.50 per share
Pass the necessary Journal entries in the books of J Ltd. for the above transactions.
Q21:A Joint Stock Company issued 15,000; 9% Debentures of ? 100 each at a premium of 5%. These
debentures were to be redeemed at a premium of 10% through the issue of shares at a premium of 25%. Journalise the issue and redemption of debentures.
Q22:Pass the necessary Journal entries in the books of Rachna Ltd. for the following transactions:
(i)Converted 740; 9% Debentures of Rs 100 each into Equity Shares of Rs 10 each issued at a premium of 25%.
(ii)Issued 1,875; 8% Debentures of Rs 100 each at a premium of Rs 10 each redeemable after three years.
Q23:X Ltd. redeemed 1,000;6% Debentures of Rs 100 each by converting them into Equity Shares of
Rs 100 each. The 6% Debentures were redeemable at a premium of 5% for which the Equity Shares were issued at a premium of 25%. Pass the necessary Journal entries for the redemption of the above mentioned Debentures in the books of X Ltd.
Q24:Ltd. issued ? 20,00,000; 8% Debentures on 1st April, 2011 at a premium of 5%. On 31st March, 2016, out of these Rs2,00,000; 8% Debentures were redeemed by converting them into Equity Shares of Rs 100 each issued at par andRs5,00,000; 8% Debentures were converted into 10% Preference Shares of Rs 100 each issued at a premium of 25%.
Pass the necessary Journal entries in the books of Z Ltd. for the redemption of debentures.
Q25:Pass necessary journal entries for the issue and redemption of 10,000, 12% debentures of Rs 50 each were issued and to be redeemed as follows:
(i)Issued at par and redeemable at a premium of 10%.
(ii)Issued at a premium of 10% and redeemable at a premium of 20%.
(iii)Issued at par and 50% of the redemption to be made in cash, and the balance to be redeemed at a premium of 20% through the issue of fresh debentures.
Q26: Pass the necessary journal entries for the following transactions in the books of Ashoka Ltd.:
(i)Purchased machinery worth Rs 1,65,000. The vendor was paid by issuing 12% Debentures Rs 100 each at a premium of 10%.
(ii)Issued Rs 1,50,000, 12% Debentures as collateral security against a bank loan of Rs 1,20,000.
(iii)Redeemed Rs 1,00,000, 12% Debentures at a premium of 10% by draw of lots.
(iv)Paid half yearly interest on Rs 1,80,000, 12% Debentures.
(v)Issued 1,000, 12% Debentures of Rs 100 each at a discount of 5%. These debentures are repayable at a premium of 10%.
Q27:On 1st January, 2015 Manoj Ltd. issued Rs 5,00,000 10%. Debentures at 6% discount repayable after 5 years at par. The company reserved the right to redeem to the extent of Rs 50,000 every year by purchase in the open market. The interest was payable half yearly on 30th June and 31st December, the same was duly paid.
On 1st January, 2016 the company purchased Rs 50,000 debentures at a cost of Rs 48,500. Pass necessary journal entries upto 1st January, 2016 if the above purchase was made: (i)for cancellation and (ii) as investment.
Q28:On 1st April 2012, a company issued 6,000; 9% Debentures of Rs100 each at a discount of 10% repayable at a premium of 10%. The terms of issue provided for the redemption of 1000 debentures every year commencing from 31st March, 2016, either by purchase from open Market or by draw of lots at the company’s option.
Q29:On 31st March, 2016, the company purchased for cancellation its own debentures of the face value ofRs 48,000 at Rs95 per debenture and Rs 12,000 at Rs90 per debenture. The expenses of purchase amounted to Rs500.Record necessary Journal entries for redemption of 9% Debentures.
TOPIC:-EMPLOYEES STOCK OPTION PLAN (ESOP)
Employees Stock Option Plan (ESOP): In order to retain high calibre employees or to give them a ] sense of belongingness, companies may offer a choice to the whole-time directors, officers and 1 employees, the right to purchase or subscribe at a future date, the securities or equity shares offered by I the company at a p re-determined rate. It is known as Employees Stock Option Plan. Such scheme is called as Employees Stock Option Plan (ESOP) or Employees Stock Option Scheme (ESOS). Employees Stock Option Plan can be used to keep plan participants focussed on company I performance and share price appreciation.
There are some specific terms associated with ESOP which are explained as under:
Vesting Period: The time duration between the granting date and the date by which all the specified vesting conditions for ESOP have been fulfilled.
Vesting Date: The date on or after which employees are entitled to receive the shares.
Grant Date: The date at which the company and its employees agree to the terms and conditions of ESOP.
Exercise Period: The time duration within which employee should exercise his right to apply ^ I shares, against the option vested in him under ESOP.
Exercise Price: The price at which shares are granted by the company to its employees for exercising the option under ESOP
Employees Compensation Expenses Account: This account denotes proportionate expense or loss for the company which arises due to the difference between the market price and exercise price (issue
Price) of the shares granted under ESOP. At the year end, this account is transferred to Statement of profit and Loss and is shown under head ‘Employees Benefit Expenses’
Employees Stock Option Outstanding Account: This account represents the total expense or loss due to options granted under ESOP. It is shown in the Balance Sheet under head ‘Shareholders’ fund’ and sub-head ‘Reserves and Surplus’.
Journal Entries
- At the time of recording the expense :
Employees Compensation Expense A/cDr.
To Employees Stock Option Outstanding A/c
(Being the proportionate expenses recognised in respect of ESOP)
Note:This entry will be passed for each year of vesting period.
II. At the time of exercising the options by the employees:
(a) When the options are exercised by all the employees
Bank A/c Dr. [Amount received, i.e., Exercise Price X
No.of Shares]
Employees Stock Options Outstanding A/c Dr. [Amount credited to Employees Stock
Option Outstanding Account,i.e, No.of Shares X (Market Price - Exercise Price)]
To Share Capital A/c[Nominal value of shares]
To Securities Premium Reserve A/c[With the balance amount, i.e., No. of
shares xMarket Price -Nominal value)]
(Being the option exercised bv the employees)
(b) When the options are not exercised by all the employees and the options get expired.
Bank A/cDr. [Amount received, i.e., Exercise Price * No.of
Shares
Employees Stock Option Outstanding A/cDr.[Amount credited to Employees Stock
Option Outstanding Account, i.e., No. of Shares (Market Price - Exercise Price)]
To Share Capital A/c[Nominal Value of Shares
To Securities Premium Reserve A/c[Amount related to options that have been exercised, i.e.,No.of Shares x (Market Price - Nominal Value)]
To General Reserve A/cAmount related to options that have not been exercised, i.e., No.of shares x (Market Price - Exercise Price)]
(Being the option exercised bv the employees)
Right Issue of Shares: According to Section 62 of the Companies Act, 2013 the existing shareholders have a right to subscribe to the fresh issue of capital in their existing proportion or to reject the offer or sell their rights. It is known as ‘Right Issue of Shares’. The right issue share price may be above the previous issue price, this difference will be known as value of right. In other words:
Value of right = Market price of a share - Average price of a share.
Buy-Back of Shares: When a company purchases its own shares from the market, it is called ‘buy-back of shares’. A Company may buy-back its own shares from out of the following sources:
- Its free reserves;
- the securities premium reserve account [Section 52(2) of the Companies Act, 2013];
- The proceeds of any shares or other specified securities.
SAMPLE PAPER
Sub: - AccountancyClass:- XII
Time allowed: 3 hoursM M: 80
General Instructions:
(i)This question paper contains Two parts A& B.
(ii)Both the parts are compulsory for all.
(iii)All parts of questions should be attempted at one place.
(iv)Marks are given at the end of each question.
Part - A
Partnership, Share Capital and Debentures
Q1Maximum number of partners in case of a banking business can be
(i)20(ii) 10(iii) 7(iv) 50(1)
Q2Which one is correct in the following options, when there is no partnership deed?
(i)No interest on loan will be provided to partner
(ii)Interest on drawings will be charged @6% p.a.
(iii)Interest on Capital will be 6% p.a.
(iv)Profit sharing ratio will be equal(1)
Q3What is the nature of Revaluation Account?
(i)Personal Account
(ii)Real Account
(iii)Nominal Account
(iv)Statement(1)
Q4What do you mean by 'Executor’?
Q5Why DRR is not necessary in case of infrastructure firms? (1)
Q6Krishna ,Sandeep and Karim are partners sharing profit in the ratio of 3:2:1.Their fixed capitals are: Krishna Rs 1,20,000,Sandeep Rs 90,000 and Karim Rs 60,000 .For the year 2013-14.Interest was credited to them @6% p.a instead of 5% p.a .Record adjustment entry. (1)
Q7Record necessary journal entries for the issue of debentures in each of the following cases:
(i)27,000,7% debentures of Rs 100 each issued at par redeemable at par.
(ii)25,000 7% debentures of Rs 100 each issued at par redeemable at 4% premium.
(iii)35,000 7% debentures of Rs 100 each issued at a discount of 4% and redeemableat apremium of 5%. (3)
Q8Jain Ltd .purchased Building for Rs 10,00,000 from Gupta Ltd.10% of the payable amount was paid by a cheque drawn in favor of Gupta Ltd. The balance was paid by issue of Equity shares of Rs 10 each at a discount of 10%. Pass necessary Journal Entries in the books of Jain Ltd. (3)
Q9On 1st January 2013,Y Ltd has 1000 12% Debentures of Rs 100 each issued at a discount of 5% redeemable at par. The DRR balances on this date is 30,000. They are due for redemption at the end of the year. Pass the necessary Journal entries for redemption of Debentures in lump sum. (3)
Q10L&M were partners in a firm sharing in the ratio of 3:2.Their fixed capitals on 1.4.2010 were L Rs 1,00,000 and M Rs 2,00,000.They agreed to allow interest on capital @ 12% per annum and to charge on drawing @ 15% per annum. The firm earned a profit,before all above adjustments of Rs 30,000 and Rs 5,000 respectively. Showing your calculations, clearly prepare Profit and Loss Appropriation A/c of L&M .The interest on capital will be allowed even if the firm incurs a loss. (3)
Q11(a) A,B and C are sharing profit in the ratio 3:2:1 ,C dies on 30 June ,2011.Accounts areclosed on 31st March every year. Sales for the year ending 31st March 2011 amounted to Rs 90,00,000.Sales form 1st April 2013 to 30 June 2013 amounted to Rs 36,00,000.The profit for the year ending 31st March 2013 amounted to Rs 4,50,000.Calculate the deceased partner’s share in the current year’s profit.
(b) There is no earning members in C’s family and hence it is agreed to take C’s daughter into partnership with 1/10th share of profit. You are required to identify the virtues in making such decision.
(4)
Q12Three charted accountants A,B and C form a partnership firm , profit sharing ratio will be 3:2:1 subject to the following:
(i)C’s Share of profit is guaranteed to be Rs 15,000 p.a. minimum.
(ii)B gives the guarantee to the effect that gross fees earned by him for the firm shall be equal to the the average gross fees of preceding five years, which was Rs 25000.The net profit for the year ended March 31st , 2013 is 75,000.The gross fees earned by B was Rs 16,000.
Show the Profit and Loss Appropriation Account giving the above effects. (4)
Q13On dissolution of a partnership firm of P,Qand R; journalise the following:
(i)A loan of Rs 50,000 advanced by P ,was paid off along with the interest of Rs 1,000.
(ii)Profit &Loss A/C balance of Rs 30,000 appears on the asset side of B/S.
(iii)Creditors of Rs 50,000 accepted Rs 45,000 in full settlement.
(iv)Expenses on Realisation amounting to Rs 1,500 was paid by R
(v)A bill of Rs5,000 received from Mohan, was discounted from the bank; is dishonored due to insolvency of Mohan. Only 50% was received from his estate.
(vi)An unrecorded asset worth Rs 10,000 was taken by Q for Rs 7,000. (6)
Q14Pass necessary Journal Entries for the following transactions:
(i)X Ltd purchased its 2000 own debentures of the face value 10,000 from the open market for immediate cancellation at Rs 95.
(ii)S Ltd purchased its 8000 own debentures of the face value Rs 200 from the open market for immediate cancellation at Rs 185.
(iii)Z Ltd purchased its 3000 own debentures of the face value Rs 500 from the open market for immediate cancellation at Rs 275. (6)
Q15Nikhil and Piyush are partners sharing Profit and loss in the ratio of 3:1. On March 31st 2012 their Balance Sheet was as follows:
Liabilities / Amount. / Assets / AmountCapital / Cash / 10,200
Nikhil / 30,000 / Bills Receivable / 3,000
Piyush / 16,200 / Stock / 20,000
Creditors / 21,000 / Debtors / 10,000
Bills Payable / 20,000 / Machinery / 30,000
General Reserve / 4,000 / Investment / 15,000
Investment Fluctuation Fund / 5,000 / Profit &loss A/c / 8,000
96,200 / 96,200
They decided to admit Jatin into the partnership on the following terms
(i)Machinery and stock is to be depreciated by 10%
(ii)Outstanding rent is Rs 2,500
(iii)Investment to be reduced by 7,500.
(iv)Jatin is to bring Rs 5,000 as Goodwill and Rs 10,000 as capital for a 1/5th share.
(v)Capitals of partners be made proportionate taking Jatin’s capital as base.
Prepare Revaluation A/c, Partners Capital A/c and Balance Sheet of the new firm.
OR
Following is the balance Sheet X , Y, and Z as on 31st March 2004 Who were sharing profit and loss in the ratio of their Capitals.