{"id":12900,"date":"2024-03-24T14:53:52","date_gmt":"2024-03-24T09:23:52","guid":{"rendered":"https:\/\/gstguntur.com\/?p=12900"},"modified":"2024-03-25T17:45:03","modified_gmt":"2024-03-25T12:15:03","slug":"redemption-of-debentures-ca-inter-accounts-study-material","status":"publish","type":"post","link":"https:\/\/gstguntur.com\/redemption-of-debentures-ca-inter-accounts-study-material\/","title":{"rendered":"Redemption of Debentures – CA Inter Accounts Study Material"},"content":{"rendered":"

Redemption of Debentures \u2013 CA Inter Accounts Study Material<\/a> is designed strictly as per the latest syllabus and exam pattern.<\/p>\n

Redemption of Debentures \u2013 CA Inter Accounts Study Material<\/h2>\n

Important Notes:<\/strong><\/p>\n

    \n
  1. In every question where a mention is given w.r.t. D.R.R. we need to create 25% DRR on 18 day of the year<\/li>\n
  2. Sinking Fund Investment is now called D.R. Fund Investments.<\/li>\n
  3. Own Debentures concept has been deleted.<\/li>\n
  4. Circumulative fund concept deleted. (Only non-circumulative concept is therefor exams) Thus, interest on fund invest forward to P&L A\/c.<\/li>\n
  5. Profit on cancellation of debentures will be transferred to P&L A\/c.<\/li>\n
  6. Premium on redemption of debentures transfered to P&L DR Fund<\/li>\n
  7. Gain on sale of investments will be transfered to P&L.<\/li>\n<\/ol>\n

    Theory Questions<\/strong><\/p>\n

    Question 1.
    \nNoida Toll Bridge Corporation Ltd. (an infrastructure Company) issued 100 lakhs 10% Debentures of \u20b9 100 each on 1st April, 2013 due for redemption on 31st March, 2014 at 10% Premium. How much minimum amount should be credited to Debenture Redemption Reserve as per the MCA clarification? Also state the amount required to be deposited\/invested in the year of redemption. Record necessary entries for redemption of debentures. (RTP)
    \nAnswer:
    \nAccording to Section 117C of Companies Act, where a company issues debenture after the commencement of this Act, it shall create a debenture redemption reserve for the redemption of such debentures, to which adequate amounts shall be credited, out of its profits every year until such debentures are redeemed.<\/p>\n

    Ministry of Corporate Affairs has made a clarification on adequacy of Debenture Redemption Reserve (DRR) vide Circular No. 04\/2013, dated 11 February, 2013.<\/p>\n

    As per this clarification, adequacy of Debenture Redemption Reserve (DRR) for debentures issued by companies including manufacturing and infrastructure companies is 25% of the value of debentures issued through public issue. Therefore, minimum amount of DRR will be \u20b9 25 crores i.e. 25% of 100 crores in the case of Noida Toll Bridge Corporation Ltd.<\/p>\n

    Further, every company required to create\/maintain DRR shall before the 30th day of April of each year, deposit or invest, as the case may be, a sum which shall not be less than fifteen percent of the amount of its debentures maturing during the year ending on the 31 st day of March next following in any one or more of the following methods, namely:
    \n(a) in deposits with any scheduled bank, free from charge or lien;
    \n(b) in unencumbered securities of the Central Government or of any State Government;
    \n(c) in unencumbered securities mentioned in clauses (a) to (d) and (ee) of section 20 of the Indian Trusts Act, 1882;
    \n(d) in unencumbered bonds issued by any other company which is notified under clause (\/) of section 20 of the Indian Trusts Act, 1882;<\/p>\n

    Accordingly, Noida Toll Bridge Corporation Ltd., have to deposit\/invest \u20b9 15 crores (100 \u00d7 15%) in any of the abovementioned categories.<\/p>\n

    \"Redemption<\/p>\n

    Question 2.
    \nComment on adequacy of Debenture Redemption Reserve (DRR) w.r.t. following: Debentures issued by-
    \n(i) All India Financial Institutions regulated by Reserve Bank of India and Banking Companies.
    \n(ii) For other Financial Institutions within the meaning given in the Companies Act.
    \n(iii) For debentures issued by NBFCs registered with the RBI.
    \n(iv) For debentures issued by other companies including manufacturing and infrastructure companies. (4 Marks) (May 2015)
    \nAnswer:<\/p>\n\n\n\n\n\n\n\n
    S.No.<\/td>\nParticulars<\/td>\nAdequacy of Debenture Redemption Reserve (DRR)<\/td>\n<\/tr>\n
    (i)<\/td>\nFor debentures issued by All India Financial Institutions (AIFIs) regulated by Reserve Bank of India.<\/td>\nNo DRR is required<\/td>\n<\/tr>\n
    (ii)<\/td>\nFor other Financial Institutions (FIs) within the meaning given in the Companies Act.<\/td>\n25% of the value of debentures issued through public issue.<\/p>\n

    No DRR is required in the case of privately placed debentures.<\/td>\n<\/tr>\n

    (iii)<\/td>\nFor debentures issued by NBFCs registered with the RBI.<\/td>\n25% of the value of debentures issued through public issue. No DRR is required in the case of privately placed debentures.<\/td>\n<\/tr>\n
    (iv)<\/td>\nFor debentures issued by other companies including manufacturing and infrastructure companies.<\/td>\nFor listed companies 25% of the value of debentures issued through public issue.<\/p>\n

    Also 25% DRR is required in the case of private placement of the value of debentures.
    \nFor unlisted companies-issuing debentures on private placement basis, the DRR will be 25% of the value of debentures.<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

    \"Redemption<\/p>\n

    Question 3.
    \nMention the ways by which Redeemable Debentures may be redeemed under the Companies Act, 2013. (4 Marks) (May 2016)
    \nAnswer:
    \nRedemption of debentures must be done according to the terms of issue of debentures and any deviation will be treated as a default by the company.
    \nRedemption by paying off the debt on account of debentures issued can be done in one of the following four methods viz
    \n(a) By payment in lump sum at the end of a specified period of time;
    \n(b) By payment in annual instalments;
    \n(c) By purchasing its own debentures in the open market.
    \n(d) By conversion into shares in full or in part depending on the terms of issue.<\/p>\n

    Question 4.
    \nHimalayas Ltd. had \u20b9 10,00,000, 8% Debentures of \u20b9 100 each as on 31st March, 2011. The company purchased in the open market following debentures for immediate cancellation:
    \nOn 01-07-2011 – 1,000 debentures @ \u20b9 97 (cum-interest)
    \nOn 29-02-2012 – 1,800 debentures @ \u20b9 99 (ex-interest)
    \nDebenture interest due date is 30th September and 31st March.
    \nGive Journal Entries in the books of the company for the year ended 31st March, 2012. (8 Marks) (Nov. 2012)
    \nAnswer:
    \nJournal Entries
    \n\"Redemption
    \n\"Redemption
    \n\"Redemption<\/p>\n

    \"Redemption<\/p>\n

    Open Market Purchase – Own Debentures Only<\/strong><\/p>\n

    Question 5.<\/p>\n

      \n
    1. X Ltd. has issued 10,000 12% Debentures of \u20b9 700 each on 1-1-20X1. These debentures are redeemable after 3 years at a premium of \u20b9 5 per debenture. Interest is payable annually.<\/li>\n
    2. On October 1, 20X2, it buys 1,500 debentures from the market at \u20b9 98 per debenture. These are sold away on June 30, 20X3 at \u20b9 705 per debenture.<\/li>\n
    3. On January 1, 20X3 it buys 1,000 debentures at \u20b9 104 per debenture from the open market. These are cancelled on April 1, 20X3.<\/li>\n
    4. On October 1, 20X3 it buys 2,000 debentures at \u20b9 106 per debenture from the open market. These debentures along with other debentures are redeemed on 31st December, 20X3.<\/li>\n<\/ol>\n

      Prepare the relevant Ledger Accounts showing the above transactions. Workings should form part of your answer. Also show the extracts of statement of profit & loss own Debenture Account for the year 20X1, 20X2, 20X3.
      \n(Note : This concept has been deleted for Nov. 2019 attempt. Please wait for clarification for May 2020 attempt. Thus, the section has been retained.)
      \nAnswer:
      \nOwn Debentures A\/c
      \n\"Redemption
      \n\"Redemption
      \n* 1,57,500 – 1,47,000
      \n** 1,500 \u00d7 105<\/p>\n

      Assumption:
      \nAll transactions are ex-interest.<\/p>\n

      Debenture Interest A\/c
      \n\"Redemption
      \n* (10,000- 1,000 – 2,000) \u00d7 100<\/p>\n

      Profit & Loss (Extract) for the year 20X1
      \n\"Redemption<\/p>\n

      Profit & Loss (Extract) for the year 20X2
      \n\"Redemption<\/p>\n

      Profit & Loss (Extract) for the year 20X3
      \n\"Redemption<\/p>\n

      Premium on Redemption of Debentures A\/c
      \n\"Redemption<\/p>\n

      12% Debentures A\/c
      \n\"Redemption
      \nWorking Notes
      \n(i) Interest paid on purchase of own debentures:
      \n\"Redemption<\/p>\n

      (ii) Interest credited to Interest on Own Debenture A\/c
      \n\"Redemption<\/p>\n

      \"Redemption<\/p>\n

      Question 6.
      \nM Ltd. furnishes the following summarized Balance Sheet as at 31st March, 2012:
      \n\"Redemption<\/p>\n

        \n
      1. The company passed a resolution to buy-back 20% of its equity capital @ \u20b9 15 per share. For this purpose, it sold its investments of \u20b9 30 lakhs for \u20b9 25 lakhs.<\/li>\n
      2. The company redeemed the preference shares at a premium of 10% on 1st April, 2012.<\/li>\n
      3. Included in its investments were \u2018Investments in own debentures\u2019 costing \u20b9 3 lakhs (face value \u20b9 3.30 lakhs). These debentures were cancelled on 1st April, 2012.<\/li>\n<\/ol>\n

        You are required to pass necessary Journal entries and prepare the Balance Sheet on 01.04.2012. (12 Marks) (Nov. 2012)
        \nAnswer:
        \nJournal Entries
        \n\"Redemption
        \n\"Redemption<\/p>\n

        Balance Sheet as on 1st April, 2012
        \n\"Redemption<\/p>\n

        Notes to Accounts
        \n\"Redemption
        \n\"Redemption<\/p>\n

        Assumption:
        \nThe buy-back of shares has been done out of the proceeds of issue of preference shares, therefore, no amount is transferred to capital redemption reserve for buy-back.<\/p>\n

        \"Redemption<\/p>\n

        Question 7.
        \nGurudev Limited purchases for immediate cancellation 6,000 of its own 12% debentures of \u20b9 100 each on 1st November, 2017. The dates of interest being 31st March, and 30th September. Pass necessary journal entries relating to the cancellation if: (4 Marks) (May 2018)
        \n(i) Debentures are purchased at \u20b9 98 ex-interest.
        \n(ii) Debentures are purchased at \u20b9 98 cum-interest.
        \nAnswer:
        \nJournal Entries
        \n(i) If Purchased Ex-interest
        \n\"Redemption<\/p>\n

        (ii) If Put chased Cum interest
        \n\"Redemption<\/p>\n

        Question 8.
        \nRama Limited issued 8% Debentures of \u20b9 3,00,000 in earlier year on which interest is payable half yearly on 31st March and 30th September. The company has power to purchase its own debentures in the open market for cancellation thereof. The following purchases were made during the financial year 2009-10 and cancellation made on 31st March, 2010:
        \n(a) On 1st April, \u20b9 50,000 nominal value debentures purchased for \u20b9 49,450, ex-interest.
        \n(b) On 1st September, \u20b9 30,000 nominal value debentures purchased for \u20b9 30,250 cum-interest.
        \nShow the Journal Entries (without narrations) for the transactions held in the year 2009-10. (2 Marks) (Nov. 2010)
        \nAnswer:
        \nJournal Entries
        \n\"Redemption<\/p>\n

        \"Redemption<\/p>\n

        Question 9.
        \nOn 1 st April, 2010, A Ltd. had outstanding in its books 1,00,000 Debentures of f 100 each, interest @ 12% per annum. The interest on debentures was paid half-yearly on 30th September and 31st March of every year. On 31st May, 2010 the company purchased 30,000 Debentures of its own @ \u20b9 98 (ex-interest) per debenture. The company cancelled the debentures so purchased on 31st March, 2011.<\/p>\n

        Pass the necessary Journal Entries to record the above transactions for the year ended 31st March, 2011. (5 Marks) (Nov. 2011)
        \nAnswer:
        \nIn the books of \u2018A\u2019 Limited
        \nJournal Entries
        \n\"Redemption<\/p>\n

        \"Redemption<\/p>\n

        Outside Investments Only<\/strong><\/p>\n

        Question 10.
        \nThe following balances appeared in the books of Paradise Ltd on 1 -4-2011:
        \n(i) 12% Debentures \u20b9 7,50,000
        \n(ii) Balance of Sinking Fund \u20b9 6,00,000
        \n(iii) Sinking Fund Investment \u20b9 6,00,000 represented by 10% \u20b9 6,50,000 secured bonds of Government of India.<\/p>\n

        Annual contribution to the Sinking Fund was \u20b9 1,20,000 made on 31st March each year. On 31-3-2012, balance at bank was \u20b9 3,00,000 before receipt of interest. The company sold the investment at 90%, for redemption of debentures at a premium of 10% on the above date.
        \nYou are required to prepare the following accounts for the year ended 31st March, 2012: (8 Marks) (May 12)
        \n(1) Debentures Account
        \n(2) Sinking Fund Account*
        \n(3) Sinking Fund Investment Account**
        \n(4) Bank Account
        \n(5) Debenture Holders Account
        \nAnswer:
        \n12% Debentures A\/c
        \n\"Redemption<\/p>\n

        Sinking Fund A\/c
        \n\"Redemption<\/p>\n

        Sinking Fund Investment A\/c (10% Secured Bonds of Govt.)
        \n\"Redemption<\/p>\n

        Bank A\/c
        \n\"Redemption
        \n‘The Oues, is based on cumulative concept. Had it been solved as per non-cumulative concept if would have been transfer to Profit & Loss A\/c.<\/p>\n

        Debenture holders A\/c
        \n\"Redemption<\/p>\n

        Question 11.
        \nThe following balances appeared in the books of Heaven Ltd. on 1st April, 2016:<\/p>\n

          \n
        1. 12% Debentures \u20b9 9,50,000;<\/li>\n
        2. Balance of Sinking Fund \u20b9 8,00,000<\/li>\n
        3. Sinking Fund Investment \u20b9 8,00,000 represented by 10% \u20b9 8,50,000 Secured Bonds of Government of India.<\/li>\n<\/ol>\n

          Annual contribution to the Sinking Fund was \u20b9 1,50,000 made on 31st March every year. On 31st March, 2017, balance at bank was \u20b9 4,00,000 before receipt of interest. The company sold the 90% face value of its investments, for redemption of debentures, at a premium of 10% on the above date.<\/p>\n

          You are required to prepare the following accounts for the year ended on 31st March, 2017: (8 Marks) (Nov. 2017)
          \n(a) Debentures Account;
          \n(b) Sinking Fund Account;
          \n(c) Sinking Fund Investment Account;
          \n(d) Bank Account; and
          \n(e) Debenture Holders Account.
          \nAnswer:
          \nDebentures A\/c
          \n\"Redemption<\/p>\n

          Sinking Fund A\/c
          \n\"Redemption<\/p>\n

          Sinking Fund Investment A\/c (10% Secured Bonds of Govt.)
          \n\"Redemption<\/p>\n

          Bank A\/c
          \n\"Redemption<\/p>\n

          Debenture holders\u2019 A\/c
          \n\"Redemption<\/p>\n

          \"Redemption<\/p>\n

          Question 12.
          \nThe following balances appeared in the books of a company as on December 31 st, 2017, 6% Mortgage 25,000 Debentures of \u20b9 100 each. Debenture Redemption Reserve (for redemption of debentures) \u20b9 26,05,000.
          \nThe following were the investments:
          \n(i) \u20b9 13,20,000, 4% Government Loan purchased at par (face value of \u20b9 100 each)
          \n(ii) \u20b9 14,00,000, 31\/2% Government paper purchased for \u20b9 13,55,000 (face value of 100 each)
          \nThe interest on debentures had been paid up to December 31st, 2017.
          \nOn February 28th, 2018, the investments were sold at \u20b9 87 and \u20b9 90 respectively and the debentures were paid off at \u20b9 101 together with accrued interest.
          \nWrite up the ledger accounts concerned.
          \nNote: The Debenture Redemption Reserve is non-cumulative. (8 Marks) (May 2018)
          \nAnswer:
          \n6% Debentures A\/c
          \n\"Redemption<\/p>\n

          Premium on Redemption of Debentures A\/c
          \n\"Redemption<\/p>\n

          Debentures Redemption Reserve Investment A\/c
          \n\"Redemption
          \n\"Redemption
          \n* Interest on investments on \u20b9 13,20,000 (4% Govt. Loan) and \u20b9 14,00,000 (3.5% Govt. Paper) not considered.<\/p>\n

          Debenture Interest A\/c
          \n\"Redemption<\/p>\n

          Debenture Redemption Reserve A\/c
          \n\"Redemption<\/p>\n

          \"Redemption<\/p>\n

          Question 13.
          \nZED Ltd. had 25,000, 10% Debentures of \u20b9 100 each outstanding as on 1st April, 2013, redeemable on 31st March, 2014. On 1st April, 2013, Sinking Fund was \u20b9 24 lakhs represented by 3,000 own Debentures purchased at the average price of \u20b9 98 and 8% Stocks of face value of \u20b9 22 lakhs. The annual instalment towards Sinking Fund was \u20b9 90,000.<\/p>\n

          On 31st March, 2014, the investments w ere realized at \u20b9 97 and the Debentures were redeemed.
          \nDraw the following Accounts for the year ended 31st March, 2014: (8 Marks) (May 2014)
          \n(i) 10% Debenture Account,
          \n(ii) Debenture Redemption Sinking Fund Account, *
          \n(iii) Show the necessary working notes.
          \n*Now called DRR A\/c.
          \nAnswer:
          \n10% Debentures A\/c
          \n\"Redemption<\/p>\n

          Debenture Redemption Sinking Fund A\/c
          \n\"Redemption<\/p>\n

          Working Notes:
          \n1. Stock as on 1st April, 2013
          \nSinking Fund Balance as on 1st April, 2013 – \u20b9 24,00,000
          \nLess: Own Debentures – \u20b9 2,94,000
          \n8% Stock – \u20b9 21,06,000<\/p>\n

          2. Sale Value of 8% Stock
          \nNumber of Stock = \u20b9 22 lakhs\/ \u20b9 100 = 22,000
          \nSale Value = 22,000 \u00d7 \u20b9 97 = \u20b9 21,34,000<\/p>\n

          3. Interest credited to Sinking Fund Account*
          \n\"Redemption<\/p>\n

          Own Debentures A\/c
          \n\"Redemption<\/p>\n

          8% Stock Account
          \n\"Redemption<\/p>\n

          Note:
          \nAs the balance of Debenture Redemption Sinking Fund Account is more than the nominal value of debentures redeemed, the amount equal to the amount of debentures redeemed may be transferred to General Reserve Account Le. \u20b9 25,00,000 and excess of fund Le. \u20b9 2,30,000 may be transferred to P&L Account.<\/p>\n

          \"Redemption<\/p>\n

          Question 14.
          \nM\/s. Piyush Ltd. had the following among their ledger opening balances on January 1, 2014;
          \n\"Redemption
          \nAs 31st December, 2014 was the date of redemption of the 2002 debentures, the company started buying own debentures and made the following purchases in the open market:
          \n1-2-2014 – 5000 debentures at \u20b9 98 cum-interest
          \n1-6-2014 – 5000 debentures at \u20b9 99 ex-interest.
          \nHalf yearly interest is due on the debentures on 30th June and 31st December in the case of both the companies.<\/p>\n

          On 31st December, 2014, the debentures in Sneha Ltd. were sold for \u20b9 95 each ex-interest. On that date, the outstanding debentures of M\/s. Piyush Ltd. were redeemed by payment and by cancellation.<\/p>\n

          Show the entries in the following ledger accounts of M\/ s. Piyush Ltd. during 2014:
          \n(i) Debenture Redemption Reserve Account,
          \n(ii) Own Debenture Account.
          \nThe face value of a debenture was \u20b9 100. (12 Marks) (May 2015)
          \nAnswer:
          \n(i) Debenture Redemption Reserve A\/c
          \n\"Redemption<\/p>\n

          (ii) Own Debentures A\/c
          \n\"Redemption<\/p>\n

          Working Note:
          \n13.5% Debentures A\/c in Sneha Ltd.
          \n\"Redemption<\/p>\n

          11% Debentures A\/c
          \n\"Redemption<\/p>\n

          Cost of debentures purchased on 1.2.2014
          \n\"Redemption<\/p>\n

          \"Redemption<\/p>\n

          Question 15.
          \nA company had 40,000; 10 debentures of 100 each outstanding on 1 April, 2015 redeemable on 31st March, 2016.<\/p>\n

          On that day, sinking fund was \u20b9 37,45,000 represented by 5,000 own debentures purchased at average price of f 99 and 9% stocks of the face value of \u20b9 33,00,000. The annual instalment was \u20b9 1,42,000. On 31 st March, 2016, the investments were realized at \u20b9 98 and the debentures were redeemed.
          \nDraw the following accounts for the year ending 31st March, 2016:
          \n(i) 10% Debentures Account.
          \n(ii) Debenture Redemption Sinking Fund Account (10 Marks) (Nov. 2016)
          \nAnswer:
          \n10% Debentures A\/c
          \n\"Redemption<\/p>\n

          Debenture Redemption Sinking Fund A\/c
          \n\"Redemption<\/p>\n

          Working Notes:
          \n1. Amount of stock as on 1st April, 2015
          \n\"Redemption<\/p>\n

          2. Sales value of 9% stock
          \n= Face vaIue\/ per stock
          \n= \u20b9 33,00,000\/ \u20b9 1oo = 33,000 stock
          \nSales value = 33,000 stock \u00d7 \u20b9 98 per stock
          \n= \u20b9 32,34,000<\/p>\n

          3. Interest credited to Sinking Fund<\/p>\n

          \"Redemption<\/p>\n

          Own Debentures A\/c
          \n\"Redemption<\/p>\n

          9% Stock A\/c
          \n\"Redemption<\/p>\n

          \"Redemption<\/p>\n

          Question 16.
          \nA Company had issued 1,000 12% debentures of \u20b9 100 each redeemable at the company\u2019s option at the end of 10 years at par or prior to that by purchase in open market or at \u20b9 102 after giving 6 months\u2019 notice. On 31st December, 2016, the accounts of the company showed the following balances:<\/p>\n

          Debenture redemption fund \u20b9 53,500 represented by 10% Govt. Loan of a nominal value of \u20b9 42,800 purchased at an average price of \u20b9 101 and \u20b9 10,272 uninvested cash in hand.<\/p>\n

          On 1st January 2017, the company purchased ? 11,000 of its own debentures at a cost of \u20b9 10,272.<\/p>\n

          On 30th June, 2017, the company gave a six months\u2019 notice to the holders of \u20b9 40,000 debentures and on 31st December, 2017 carried out the redemption by sale of \u20b9 40,800 worth of Govt. Loan at par and also cancelled the own debentures held by it.<\/p>\n

          Prepare ledger account of Debenture Redemption Fund Account and Debenture Redemption Fund Investment Account for the year ended 31.12.2017, assuming that, interest on company debentures & Govt, loan was payable on 31st December every year. (8 Marks) (November 2018)
          \nAnswer:
          \nDebenture Redemption Fund A\/c
          \n\"Redemption<\/p>\n

          Debenture Redemption Fund Investment A\/c
          \n\"Redemption<\/p>\n

          Question 17.
          \nA Company had issued 20,000, 13% Convertible debentures of \u20b9 100 each on 1st April, 2007. The debentures are due for redemption on 1st July, 2009. The terms of issue of debentures provided that they were redeemable at a premium of 5% and also conferred option to the debenture holders to convert 20% of their holding into equity shares (Nominal value ? 10) at a price of \u20b9 15 per share. Debenture holders holding 2,500 debentures did not exercise the option. Calculate the number of equity shares to be allotted to the Debenture holders exercising the option to the maximum. (2 Marks) (May 2010)
          \nAnswer:
          \nComputation of number of equity shares to be allotted
          \n\"Redemption
          \nRedemption value of 3,500 debentures at a premium of 5% \u20b9 3,67,500
          \n[3,500 \u00d7 ( 100 + 5)]
          \nEquity shares of \u20b9 10 each issued on conversion [\u20b9 3,67,500\/\u20b9 15] = 24,500 shares<\/p>\n

          \"Redemption<\/p>\n

          Question 18.
          \nXYZ Ltd. had issued 30,000, 15% convertible debentures of \u20b9 100 each on 1st April, 2008. The debentures are due for redemption on 1st March, 2011. The terms of issue of debentures provided that they were redeemable at a premium of 5% and also conferred option to the debenture holders to convert 20% of their holding into equity shares (Nominal Value \u20b9 10) at a price of \u20b9 15 per share. Debenture holders holding 2500 debentures did not exercise the option. Calculate the number of equity shares to be allotted to the Debenture holders exercising the option to the maximum. (4 Marks) (May 2011)
          \nAnswer:
          \nComputation of number of equity shares allotted to be debenture holders
          \n\"Redemption<\/p>\n

          Question 19.
          \nA company had issued 30,000,14% convertible debentures of \u20b9 100 each on 1st April, 2014. The debentures are due for redemption on 1st July, 2016. The terms of issue of debentures provided that they were redeemable at a premium of 5% and also conferred option to the debenture holders to convert 20% of their holding into equity shares (Nominal value \u20b9 10) at a price of \u20b9 15 per share. Debenture holders holding 2,500 debentures did not exercise the option. Calculate the number of equity shares to be allotted to the debenture holders exercising the option to the maximum. (4 Marks) (May 2017)
          \nAnswer:
          \nComputation of number of equity shares to be allotted
          \n\"Redemption
          \nRedemption value of 5,500 debentures at a premium of 5% [5,500 \u00d7 (100 + 5)] – \u20b9 5,77,500
          \nEquity shares of \u20b9 10 each issued on conversion [\u20b9 5,77,500\/\u20b9 15] – 38,500 shares<\/p>\n

          \"Redemption<\/p>\n

          Redemption By Conversion And Cash<\/strong><\/p>\n

          Question 20.
          \nThe summarised Balance Sheet of A Limited, as on 30th June, 2014, stood as follows:
          \n\"Redemption
          \nThe debentures are due for redemption on 30th June, 2014. The terms of issue of debentures provided that they were redeemable at a 10% premium and also conferred option to the debenture holders to convert 25% of their holding into equity shares at a predetermined price of \u20b9 27.50 per share and the balance payment in cash.<\/p>\n

          Assuming that:<\/p>\n

            \n
          1. except for 80 debenture holders holding totally 50,000 debentures, the rest of them exercised the option for maximum conversion.<\/li>\n
          2. the investments realise \u20b9 70 lakhs on sale; and<\/li>\n
          3. \u00a0all the transactions are put through, without any lag, on 30th June, 2014.<\/li>\n<\/ol>\n

            Redraft the balance sheet of the company as on 30th June, 2014 after giving effect to the redemption. Show your calculations in respect of the number of equity shares to be allotted and the cash payment necessary. (RTP)
            \nAnswer:
            \nBalance Sheet as on June 30, 2014
            \n\"Redemption<\/p>\n

            Notes to Accounts
            \n\"Redemption<\/p>\n

            Working Notes:
            \n(i) Calculation of number of shares to be allotted:
            \n\"Redemption
            \nRedemption value of 25,000 debentures @ 110 \u20b9 27,50,000
            \nNumber of Equity Shares to be allotted:
            \n= \\(\\frac{27,50,000}{27.50}\\) = 1,00,000 shares of \u20b9 10 each.<\/p>\n

            (ii) Calculation of cash to be paid:
            \n\"Redemption<\/p>\n

            (iii) Cash and Bank Balance:
            \n\"Redemption<\/p>\n

            \"Redemption<\/p>\n

            Question 21.
            \nM Ltd. have authorized capital of 8,00,000 equity shares of \u20b9 10 each. But out of these 2,40,000 shares have been issued as fully paid.<\/p>\n

            The company has an outstanding 14% Debentures loan of \u20b9 24,00,000 redeemable at 102 per cent and interest has been paid up to date on December 31, 2016. On that date, the balance of the Debenture Redemption Reserve Account is \u20b9 20,00,000 and corresponding Investment Account \u20b9 29,00,000 (at cost) of which the market value is \u20b9 18,00,000.<\/p>\n

            The directors resolved to redeem the Debentures on January 1, 2017 and the holders are given an option to receive payment either wholly in cash or wholly in fully paid equity shares @ 8 shares for every \u20b9 100 of debentures.<\/p>\n

            75% of the holders decided to exercise the option for taking shares in repayment and cash for the rest is procured by realizing an adequate amount of investment at the prevailing market value.<\/p>\n

            Draw up journal entries (including Cash Book Entries) to give effect to the above transactions. (RTP)
            \nAnswer:
            \nJournal Entries
            \n\"Redemption
            \n\"Redemption<\/p>\n

            Working Notes:
            \n(1) For every \u20b9 100 debenture, amount payable on redemption including premium is \u20b9 102
            \nLess: Face value of 8 shares of \u20b9 10 each to be issued for redemption of each debenture (8 \u00d7 \u20b9 10) – \u20b9 80
            \nPremium on issue of 8 shares – \u20b9 22
            \nTherefore, premium on issue of each share \u20b9(\\(\\frac{22}{8}\\)) – \u20b9 2.75<\/p>\n

            (2) Shares to be issued for conversion of 75% Debentures into \u00d7 shares @ 8 shares for every \u20b9 100 Debenture i.e. \u20b9 24,00,000
            \n\\(\\frac{75}{100}\\) \u00d7 \\(\\frac{8}{100}\\) = 1,44,000 shares<\/p>\n

            (3) Cash payment for remaining 25% debenture holders who exercised the option of cash i.e., \u20b9 24,00,000 \\(\\frac{25}{100}\\) \u00d7 \\(\\frac{102}{100}\\)
            \n= \u20b9 6,12,000<\/p>\n

            (4) Face value of investment to be sold to realize \u20b9 6,12,000 will be \u20b9 6,80,000 [ i.e. \u20b9 \\(\\frac{20,00,000}{18,00,000}\\) \u00d7 \u20b9 6,12,000)
            \nLoss on sale of investment = 6,80,000 – 6,12,000 = 68,000<\/p>\n

            (5) Debenture Redemption Reserve transferred to General Reserve:
            \n20,00,000 – 48,000 – 68,000 = \u20b9 18,84,000<\/p>\n

            \"Redemption<\/p>\n

            Question 22.
            \nThe summarized Balance Sheet of S Ltd. as on 31st March, 2018 read as under:
            \n\"Redemption
            \nThe debentures are due for redemption on 1st April, 2018. The terms of issue of debentures provided that they were redeemable at a premium 10% and also conferred option to the debenture holders to convert 40% of their holding into equity shares at a predetermined price of \u20b9 11 per share and the balance payment in cash.<\/p>\n

            Assuming that:<\/p>\n

              \n
            1. Except for debenture holders holding 200 debentures in aggregate, rest of them exercised the option for maximum conversion,<\/li>\n
            2. The investments realized \u20b9 56,000 on sale,<\/li>\n
            3. All the transactions were taken place on 1st April, 2018,<\/li>\n
            4. Premium on redemption of debentures is to be adjusted against General Reserve. You are required to
              \n(a) Redraft the Balance Sheet of S Ltd. as on 01.04.2018 after giving effect to the redemption.
              \n(b) Show your calculations in respect of the number of equity shares to be allotted and the cash payment necessary. (RTP)<\/li>\n<\/ol>\n

              Answer:
              \nBalance Sheet as on 01.04.2018
              \n\"Redemption<\/p>\n

              Notes to Accounts
              \n\"Redemption<\/p>\n

              Working Notes:
              \n(i) Calculation of number of shares to be allotted
              \n\"Redemption<\/p>\n

              (ii) Calculation of cash to be paid
              \n\"Redemption<\/p>\n

              (iii) Cash and Bank Balance
              \n\"Redemption<\/p>\n

              \"Redemption<\/p>\n

              Question 23.
              \nThe summarized Balance Sheet of Entyce Ltd. as on 31st March, 2013 read as under:
              \n\"Redemption
              \nThe debentures are due for redemption on 1st April, 2013. The terms of issue of debentures provided that they were redeemable at a premium 5% and also conferred option to the debenture holders to convert 25% of their holding into equity shares at a pre-determined price of \u20b9 11.90 per share and the balance payment in cash.
              \nAssuming that:<\/p>\n

                \n
              1. Except for debenture holders holding 12,000 debentures in aggregate, rest of them exercised the option for maximum conversion,<\/li>\n
              2. The investments realized 32,00,000 on sale,<\/li>\n
              3. All the transactions were taken place on 1st April, 2013 without any lag, and<\/li>\n
              4. Premium on redemption of debentures is to be adjusted against General Reserve.<\/li>\n<\/ol>\n

                Redraft the Balance Sheet of Entyce Ltd. as on 01.04.2013 after giving effect to the redemption. Show your calculations in respect of the number of equity shares to be allotted and the cash payment necessary. (8 Marks) (Nov. 2013)
                \nAnswer:
                \nBalance Sheet as on 01.04.2013
                \n\"Redemption
                \n\"Redemption<\/p>\n

                Notes to Accounts
                \n\"Redemption<\/p>\n

                Working Notes:
                \n(i) Calculation of number of shares to be allotted
                \n\"Redemption
                \nNumber of Equity Shares to be allotted:
                \n\\(\\frac{17,85,000}{11.90}\\)
                \n= 1,50,000 shares of \u20b9 10 each.<\/p>\n

                (ii) Calculation of cash to be paid
                \n\"Redemption<\/p>\n

                (iii) Cash and Bank Balance
                \n\"Redemption<\/p>\n

                \"Redemption<\/p>\n

                Open Market Purchase – Own Debentures And Outside Investments<\/strong><\/p>\n

                Question 24.
                \nM Limited recently made a public issue of debentures. The following information is available in respect of the issue:<\/p>\n

                  \n
                1. 3,00,000 partly convertible debentures of face value and issue price of \u20b9 100 per debenture were issued;<\/li>\n
                2. Conversion of 50% of each debenture is to be done on expiry of 6 months from date of close of issue;<\/li>\n
                3. Date of closure of subscription list is 1st June, 2012. Date of allotment is 1st July, 2012;<\/li>\n
                4. Interest on debenture at the rate of 12% is payable from date of allotment;<\/li>\n
                5. Equity share of \u20b9 10 each are issued at \u20b9 50 per share for the purpose of conversion;<\/li>\n
                6. Underwriting commission is 2%;<\/li>\n
                7. 2,25,000 debentures were applied for;<\/li>\n
                8. Interest on debentures is payable half yearly on 30th September and 31st March.<\/li>\n<\/ol>\n

                  Give Journal entries for all transactions relating to the above, including cash and bank entries for the year ended 31st March, 2013. (8 Marks) (Nov. 2013)
                  \nAnswer:
                  \nJournal Entries
                  \n\"Redemption
                  \n\"Redemption
                  \n\"Redemption<\/p>\n

                  Working Note:
                  \nCalculation of Debenture Interest for the half year ended 31st March, 2013
                  \n\"Redemption<\/p>\n

                  \"Redemption<\/p>\n

                  Question 25.
                  \nVenus Limited recently made a public issue in respect of which the following information is available:<\/p>\n

                    \n
                  1. No. of partly convertible debentures issued 4,00,000; face value and issue price of \u20b9 100 per debenture.<\/li>\n
                  2. Convertible portion per debenture – 80%, date of conversion – on expiry of 7 months from the date of closing of issue.<\/li>\n
                  3. Date of closure of subscription list – 01.06.2013, date of allotment – 01.07.2013, Rate of interest on debentures – 10% p.a. payable from the date of allotment. Value of equity share for the purpose of conversion – \u20b9 40 (Face value \u20b9 10)<\/li>\n
                  4. Underwriting commission – 3%<\/li>\n
                  5. No. of debentures applied for 3,00,000<\/li>\n
                  6. Interest payable on debentures – half yearly on 30th September and 31st March.<\/li>\n<\/ol>\n

                    Write relevant journal entries for all transactions arising out of the above during the year ended on 31st March, 2014 (including cash and bank entries). (8 Marks) (Nov. 2014)
                    \nAnswer:
                    \nJournal Entries
                    \n\"Redemption
                    \n\"Redemption<\/p>\n

                    \"Redemption<\/p>\n

                    Working note:
                    \nComputation of debenture interest (for the half year ended 31st March, 2014)
                    \n\"Redemption<\/p>\n","protected":false},"excerpt":{"rendered":"

                    Redemption of Debentures \u2013 CA Inter Accounts Study Material is designed strictly as per the latest syllabus and exam pattern. Redemption of Debentures \u2013 CA Inter Accounts Study Material Important Notes: In every question where a mention is given w.r.t. D.R.R. we need to create 25% DRR on 18 day of the year Sinking Fund …<\/p>\n

                    Redemption of Debentures – CA Inter Accounts Study Material<\/span> Read More »<\/a><\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"spay_email":"","footnotes":""},"categories":[167],"tags":[],"jetpack_featured_media_url":"","_links":{"self":[{"href":"https:\/\/gstguntur.com\/wp-json\/wp\/v2\/posts\/12900"}],"collection":[{"href":"https:\/\/gstguntur.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/gstguntur.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/gstguntur.com\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/gstguntur.com\/wp-json\/wp\/v2\/comments?post=12900"}],"version-history":[{"count":1,"href":"https:\/\/gstguntur.com\/wp-json\/wp\/v2\/posts\/12900\/revisions"}],"predecessor-version":[{"id":13147,"href":"https:\/\/gstguntur.com\/wp-json\/wp\/v2\/posts\/12900\/revisions\/13147"}],"wp:attachment":[{"href":"https:\/\/gstguntur.com\/wp-json\/wp\/v2\/media?parent=12900"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/gstguntur.com\/wp-json\/wp\/v2\/categories?post=12900"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/gstguntur.com\/wp-json\/wp\/v2\/tags?post=12900"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}