CA FOUNDATION JANUARY 2025

MOCK EXAM 1 – Answer Key

PAPER 1: ACCOUNTING
Question no. 1 is compulsory.
Candidates are required to answer any four questions from the remaining five questions.
Working Notes should form part of the answer

TIME : 3 HOURS MAX MARKS : 100

Answer 1:
(a) (1) False: Under matching concept all expenses matched with the revenue of
that period should only be taken into consideration. In the financial
statements of the organization if any revenue is recognized then expenses
related to earn that revenue should also be recognized.
(2) False: The nature of business is a very important criteria in separating an
expenditure between capital and revenue. For example- For a trader dealing
in furniture, purchase of furniture is revenue expenditure but for any other
trade, the purchase of furniture should be treated as capital expenditure and
shown in the balance sheet as asset.
(3) False: When it is probable that the firm will need to pay off the obligation,
this gives rise to provision.
(4) False: The allowance made for promoting sales is called 'Trade Discount and
it may vary with the quantity purchased whereas cash discount is allowed for
encouraging prompt payment.
(5) False: Cash column of cash-book will always show a debit balance, because
cash in hand can never be negative.
(6) True: With every new partner, remaining old partners have to foregone a
proportion in their share which is called as sacrificing ratio.

Answer:
(b) Statement of Calculation of Value of Inventory 31/03/17
Opening Balance of Inventory as on 01.04.2016 3,50,000
Less : Value of Abnormal item (1,00,000 – 30,0000) (1/2 M) { 70,000 2,80,000
Add : Purchase b/w 01.04.2016 to 31.03.2017 17,30,000
Add : Manufacturing Exps. 3,50,000
Cost of normal goods available for sale 23,60,000
Less : Cost of goods sold
Total Sales 26,10,000
(-) Abnormal item sale (1/2 M){ 80,000 25,30,000
(-) GP @ 25% on cost or 20% on sales (1/2 M){ 5,06,000 20,24,000
Value of Closing Stock as on 31.03.2017 3,36,000
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 Answer:
(c)

Journal Entries in the books of Preet Ltd

Rs. Rs.
1-4-2022 Equity share final call A/c Dr. 2,70,000
To Equity share capital A/c 2,70,000
(For final calls of Rs. 2 per share on
1,35,000 equity shares due as per Board’s
Resolution dated….)
20-4-2022 Bank A/c Dr. 2,70,000
To Equity share final call A/c 2,70,000
(For final call money on 1,35,000 equity
shares received)
Securities Premium A/c Dr. 37,500
Capital Redemption Reserve A/c Dr. 60,000

General Reserve A/c Dr. 1,80,000

Profit and Loss A/c (b.f.) Dr. 60,000
To Bonus to shareholders A/c 3,37,500
(For making provision for bonus issue of
one share for every four shares held)
Bonus to shareholders A/c Dr. 3,37,500
To Equity share capital A/c 3,37,500
(For issue of bonus shares)

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 Answer 2:
(a) M/s Raghuram & Associates
Trading Account for the year ended 31st March 2018
Particulars Details Amount Particulars Details Amount
Rs. Rs.
To Opening Stock 3,20,000 By Sales 15,00,000
To Purchases 12,00,000 Less: Sales Returns (24,000) 14,76,000
Less: Purchase (18,000) 11,82,000 By Closing Stock 4,10,000
Returns
To Freight 62,000
To Gross Profit c/d 3,22,000
18,86,000 18,86,000

M/s Raghuram & Associates

Profit and Loss Account for the year ended 31st March 2018
Particulars Details Amount Particulars Details Amount
Rs. Rs.
To Salaries 72,000 By Gross profit 3,22,000
b/d
To Rent for Godown 55,000 By Discount 12,000
received
Add: Outstanding 5,000 60,000
To Provision for Doubtful Debts 16,200
(W.N.4)
To Rent and Taxes 24,000
To Discount Allowed 7,500
To Carriage outwards 8,500
To Printing and stationery 6,000
To Electricity charges 14,000
To Insurance premium (W.N. 1) 4,800
To Depreciation (W.N. 2) 80,000
To General expenses 11,000
To Bank Charges 3,800
To Interest on loan 4,400
Add: Outstanding (W.N. 3) 100 4,500
To Motor car expenses (Repairs) 13,000
To Net Profit transferred to 8,700
Capital A/c
3,34,000 3,34,000

Balance Sheet of M/s Raghuram & Associates as at 31st March 2018

Liabilities Details Amount Assets Details Amount
Rs. Rs.

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 Capital 14,11,400 Land & Building 5,00,000
Add: Net Profit 8,700 Less: Depreciation (25,000) 4,75,000
Less: Drawings (20,000) Motor Vehicles 1,00,000
Less: proprietor’s (42,000) 13,58,100 Less: Depreciation (20,000) 80,000
Insurance Premium
Loan from Rajan 60,000 Office equipment 2,00,000
Add: Outstanding 100 60,100 Less: Depreciation (30,000) 1,70,000
Interest
Sundry Creditors 62,000 Furniture & Fixture 50,000
Outstanding rent 5,000 Less: Depreciation (5,000) 45,000
Stock in Trade 4,10,000
Sundry Debtors 2,80,000
Less: Provision for (14,000) 2,66,000
doubtful debts
Cash at hand 16,000
Cash in bank 22,000
Prepaid insurance 1,200
(W.N. 1)
14,85,200 14,85,200

Working Notes:
(1) Insurance premium Rs.
Insurance premium as given in trial balance 48,000
Less: Personal premium (42,000)
Less: Prepaid for 3 months
 6,000  3
  (1,200)
 15 
Transfer to Profit and Loss A/c 4,800

(2) Depreciation
Building @ 5% on 5,00,000 25,000
Motor Vehicles @ 20% on 1,00,000 20,000
Furniture & Fittings @ 10% on 50,000 5,000
Office Equipment @ 15% on 2,00,000 30,000
Total 80,000

(3) Interest on Loan

Interest on Loan Rs. 60,000 X 10% X 9/12 = 4,500
Less: interest as per Trial Balance = (4,400)
Amount (Outstanding) 100

(4) Provision for bad debts A/c

Particulars Amount Particulars Amount
(Rs.) (Rs.)
To bad debts a/c 12,200 By Balance b/d 10,000
To balance c/d 14,000 By P&L A/c 16,200
(5% of 2,80,000)
26,200 26,200

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 Answer:
(b) Trading & P&L A/c of Mr. Tilak
for the year ending 31.3.2023
Particulars Rs. Particulars Rs.
To Opening Stock 35,000 By Sales 2,49,000
To Purchases 2,01,000 By Closing Stock 75,000
To Gross Profit c/d 88,000
3,24,000 3,24,000
To Expenses 37,500 By Gross Profit b/d 88,000
To Petty Expenses 7,500
To Depreciation 2,000
To Net Profit 41,000
88,000 88,000

Balance Sheet as on 31.3.2023

Liabilities Rs. Rs. Assets Rs.
Capital A/c Fixed Asset 18,000
Opening Capital 95,000 Stock 75,000
Add Net Profit 41,000 Sundry Debtors 27,000
Less: Drawings (24,000) 1,12,000 Cash at Bank 13,500
Sundry Creditors 35,000 Cash in Hand 15,500
Expenses Payable 2,000
1,49,000 1,49,000

Working notes:
1. Sundry Debtors A/c
Particulars Rs. Particulars Rs.
To Bal b/d 23,000 By Cash 55,000
To Sales (credit)(b.f.) 2,49,000 By Bank 1,90,000
By Bal c/d 27,000
2,72,000 2,72,000

2. Sundry Creditors A/c

Particulars Rs. Particulars Rs.
To Cash 26,000 By Bal B/d 15,000
To Bank 1,55,000 By Purchases (credit) (b.f.) 2,01,000
To Bal c/d 35,000
2,16,000 2,16,000

3. Cash A/c
Particulars Rs. Particulars Rs.
To Balance b/d 4,000 By Sundry Creditors 26,000
To Sundry Debtors 55,000 By Petty expenses 7,500
By Drawings 10,000
By Balance c/d 15,500
59,000 59,000

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 4. Bank A/c
Particulars Rs. Particulars Rs.
To Balance b/d 28,000 By Sundry Creditors 1,55,000
To Sundry Debtors 1,90,000 By Expenses 35,500
By Drawings 14,000
By Balance c/d 13,500
2,18,000 2,18,000

Answer 3:
(a) Dr. CASH BOOK (AMENDED BANK COLUMN) Cr.
Particulars Rs. Particulars Rs.
To Balance b/d 400 By Bank charges 200
To Cheque deposited but not recor. 2,000 By Insurance premium 500
To Bills Receivables 2,000 By Cheques dishonored 1,000
To Interest allowed 100 By Bill discounted 4,000
To Cheques issued returned 300 By Cash receipt wrongly recor. 1,000
To Direct Payment by Customers 700
To Cash Payment wrongly recor. 600
To Balance c/d 600
6,700 6,700
BANK RECONCILIATION STATEMENT AS AT 31ST MARCH…
Particulars Plus Minus
Items Items
Rs. Rs.
A. Adjusted Bank Overdraft as per Amended Cash Book 600
B. Add: Cheques issued but not yet presented for payment 2,500
A wrong credit given by bank in Pass Book 400
C. Less: Cheques received and recorded in Bank column but 1,000
not yet sent to Bank for collection
Cheques deposited but not yet collected by the Bank 1,500
A wrong debit given by Bank in Pass Book 800
2,900 3,900
D. Overdraft as per Pass Book 1,000

Answer:
(b) (i) RECTIFICATION OF ERRORS
JOURNAL
Date Particulars L.F. Dr. (Rs.) Cr. (Rs.)
(a) Suspense A/c Dr. 100
To Profit and Loss Adjustment A/c 100
(Being Sales Book under cast, now rectified)
(b) Profit and Loss Adjustment A/c Dr. 200
To Suspense A/c 200
(Being wrong carrying forward, now rectified)
(c) Suspense A/c Dr. 3,600
To X 3,600
(Being wrong posting to X, now rectified)
(d) Profit and Loss Adjustment A/c Dr. 3,600
To X 3,600
(Being wrong recording, now rectified)
(e) Furniture A/c Dr. 10,000
To Profit and Loss Adjustment A/c 10,000

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 (Being wrong recording, now rectified)
(f) Ys A/c Dr. 1,000
To Furniture A/c 1,000
(Being wrong recording, now rectified)
(g) Profit & Loss Adjustment A/c Dr. 6,300
To Capital A/c 6,300
(Being the transfer of Balance of P & L
Adjustment A/c)

(ii) Dr. SUSPENSE ACCOUNT Cr.

Particulars Rs. Particulars Rs.
To Profit & Loss Adjustment A/c 100 By Balance b/d 3,500
To X's A/c 3,600 By Profit & Loss Adjustment A/c 200
3,700 3,700

(iii) EFFECT OF RECTIFICATION OF ERRORS ON LAST YEAR PROFITS

Rectifying Entry Decrease in Profit Rs. Increase in Profit Rs.
(a) --- 100
(b) 200 --
(c) No effect No effect
(d) 3,600
(e) --- 10,000
(f) No effect No effect
3,800 10,100
Net Increase in Profit = Rs. 10,100 - Rs. 3,800 = Rs. 6,300.

Answer 4:
(a) Books of P & Q LLP. Realization Account
Particulars Rs. Particulars Rs.
To Debtors 25,000 By Creditors 20,000
To Stock 35,000 By Bank loan 5,000
To Furniture 40,000 By Bank:
To Machinery 60,000 1,60,000 Investment 25,000
To Bank: Furniture 30,000
Creditors 20,000 Machinery 50,000
Bank loan 5,000 Debtors (90%) 22,500
Outstanding bill 2,000 27,000 Stock 20,125
To Profit transferred to: Bad debts Recovered 1,245 1,48,870
P’s capital 1,310 By P’s capital 15,750
Q’s capital 1,310 2,620 (stock taken over)
1,89,620 1,89,620

Partners’ Capital Accounts

P Q P Q
To P’s Current Account 16,940 By Balance b/d 1,00,000 50,000
To Bank 83,060 68,810 By Q’s current Account 18,810
1,00,000 68,810 1,00,000 68,810

Bank Account
Rs. Rs.
To Balance b/d 30,000 By Realization 27,000
To Realization 1,48,870 By P’s capital 83,060
By Q’s capital 68,810
1,78,870 1,78,870

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 Working Note:
Partners’ Current Accounts
P Q P Q
To Balance b/d 10,000 By Balance b/d 10,000
To Realization 15,750 By Reserves 7,500 7,500
To Q’s capital 18,810 By Realization (profit) 1,310 1,310
By P’s Capital 16,940
25,750 18,810 25,750 18,810

Answer:
(b) JOURNAL ENTRIES
Date Particulars. L.F DR. CR.
(Rs.) (Rs.)
2018 Revaluation A/c Dr. 1,400
April 1 To Stock A/c 480
To Provision for doubtful debts A/c 150
To outstanding legal charges A/c 770
(Decrease in the value of assets and increase in
liabilities)
Land and Building A/c Dr. 5,000
To Revaluation A/c 5,000
(Increase in the value of assets)
Revaluation A/c Dr. 3,600
To A's Capital A/c 1,600
To B's Capital A/c 1,200
To C's Capital A/c 800
(Profit on revaluation transferred to partner's
capital A/c)
Investments Fluctuation Reserve A/c Dr. 7,500
To Investment A/c 3,000
To A's Capital A/c 2,000
To B's Capital A/c 1,500
To C's Capital A/c 1,000
(Decrease in the value of investments met out of
Investments Fluctuation Reserve
A's Capital A/c Dr. 1,950
C's Capital A/c Dr. 1,650
To B's Capital A/c 3,600
B's share of goodwill adjusted to the accounts of
continuing partners in their gaining ratio 13:11)
B's Capital A/c Dr. 19,800
To B's Loan A/c 19,800
(The transfer of B's Capital A/c to B's Loan A/c)
A's Capital A/c(2) Dr. 2,150
To Bank A/c 2,150
(The amount returned to A, to bring his capital to
profit sharing ratio)
Bank A/c (3) Dr. 1,350
To C's Capital A/c 1,350
(The amount brought in by C to raise his capital to
profit sharing ratio)

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 Dr. CAPITAL ACCOUNTS CR.
Particulars A B C Particulars A B C
To B's Capital By Balance b/d 18,000 13,500 9,000
A/c 1950 - 1,650 By Revaluation
(Goodwill) - A/c 1,600 1,200 800
To B's Loan A/c - 19,800 } By Investments
To Balance c/d 19,650 - 9,150 Fluctuation
Reserve 2,000 1,500 1,000
By A's Capital
A/c (goodwill) - 1,950 -
By C's Capital
A/c (Good wil) - 1,650 -
21,600 19,800 10,800 21,600 19,800 10,800
To Bank A/c By Balance b/d 19,650 - 9,150
(Bal. fig.) 2,150 } - By Bank A/c - - 1,350
To Balance c/d 17,500 10,500 (Bal. Fig.)
BALANCE
19,650 - SHEET (After B's Retirement)19,650
10,500 - 10,500
as at 1st April, 2018
Liabilities Rs. Assets Rs.
Sundry Creditors 6,900 Cash at Bank(4) 4,700
Outstanding legal 770 Sundry Debtors 5,000
charges
B's Loan (1/2 M){ 19,800 Less: Provision 250 4,750
Capital Accounts Stock 7,520
A 17,500 Investments 8,500
C 10,500 28,000 Land and Building 30,000
55,470 55,470

Working Notes:
(1) Calculation of Gaining Ratio on B's retirement:
Gaining Ratio = New Ratio - Old Ratio
5 4 45  32 13
A Gains =   
8 9 72 72
3 2 27  16 11
C Gains=   
8 9 72 72
13 11
Hence, Gaining Ratio between A and C  : or13 : 11
72 72
(2) Adjustment of Capitals according to new profit sharing ratio :
Total Capital of the new firm = Rs. 28,000
5
Therefore, A's Capital in the new firm should be th of Rs. 28,000 =Rs. 17,500
8
A's existing capital =Rs. 19,650
Hence, A will be returned =Rs. 2,150
(3) 3
C's capital in the new firm should be th of Rs 28,000 =Rs. 10,500
8
C's existing capital=Rs. 9,150
Hence, C will bring =Rs 1,350
Calculation of Bank Balance is as follows:

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 Dr. Bank Account Cr.
Particulars Rs. Particulars Rs.
To Balance b/d 5,500 By A's Capital A/c 2,150
To C's Capital A/c 1,350 By Balance c/d 4,700
6,850 6,850

Answer 5:
(a) Journal
Date Particulars Dr. Cr.
(Rs.) (Rs.)
Bank A/c Dr. 75,000
To Share Application A/c 75,000
(For application money received on 1500 shares @
Rs.50 per share)
Share Application A/c Dr. 75,000
To Equity Share Capital A/c 75,000
(For disposition of application money received)
Preference Share Capital A/c Dr. 1,30,000
Premium on Redemption of Preference Shares A/c Dr. 13,000
To Preference Shareholders A/c 1,43,000
(For amount payable on redemption of preference
shares)
Bank A/c Dr. 30,000
Profit and Loss A/c (loss on sale) A/c Dr. 7,000
To Investment A/c 37,000
(For sale of investments at a loss of Rs. 7,000)
Profit and Loss A/c Dr. 55,000
To Capital Redemption Reserve A/c 55,000
(For transfer to CRR out of divisible profits an
amount equivalent to excess of nominal value of
preference shares over proceeds (face value of
equity shares) i.e., Rs. 1,30,000 - Rs. 75,000)
Preference Shareholders A/c Dr. 1,43,000
To Bank A/c 1,43,000
(For payment of preference shareholders)
Profit and Loss A/c Dr. 13,000
To Premium on Redemption of Preference 13,000
Shares A/c
(For writing off premium on redemption out of
profits)

Working Note:
Calculation of Number of Shares: Rs.
Amount payable on redemption (Rs. 1,30,000 + 10% of Rs. 1,30,000) 1,43,000
Less: Sale price of investment (30,000)
1,13,000
Less: Available bank balance (62,000 - 24,000) (38,000)
Funds from fresh issue 75,000
 No. of shares = 75,000/50=1500 shares

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 Answer:
(b)
Dr. MACHINERY ACCOUNT Cr.
Date Particulars Rs. Date Particulars Rs.
2005 2005
April 1 To Balance b/d 5,00,000 Oct. 1 By Machinery Disposal A/c 1,00,000
2006
March 31 By Balance c/d 4,00,000
5,00,000 5,00,000
2006
April 1 To Balance b/d 4,00,000

Dr. PROVISION FOR DEPRECIATION ACCOUNT Cr.

Date Particulars Rs. Date Particulars Rs.
2005 2005
Oct. 1 To Machinery Disposal 42,400 April 1 By Balance b/d 1,16,000
A/c (WN 1)
Oct. 1 By Depreciation A/c 6,400
(WN 1)
2006 2006
March To Balance c/d 1,44,000 March 31 By Depreciation A/c 64,000
31 (WN 2)
1,86,400 1,86,400
2006
April 1 By Balance b/d 1,44,000

Dr. MACHINERY DISPOSAL ACCOUNT Cr.

Date Particulars Rs. Date Particulars Rs.
2005 2005
Oct. 1 To Machinery A/c 1,00,000 Oct. 1 By Provision for 42,400
Depreciation A/c
Oct. 1 To Gain (profit) on 2,400 Oct. 1 By Bank A/c – Sale 60,000
Sale (Bal. Fig.)
(Profit and Loss A/c)
1,02,400 1,02,400

Working Notes :
1. Depreciation provided on Machinery sold till 1st October, 2005: Rs.
For 2003-04 (Rs. 1,00,000 x 20/100) 20,000
For 2004-05 (Rs. 1,00,000 – Rs. 20,000) x 20/100 16,000
For 2005-06 (Rs. 1,00,000 – Rs. 20,000 – Rs. 16,000) x 20/100 x 6/12 6,400
Total Depreciation provided on Machinery sold 42,400
2. Calculation of Depreciation provided for 2005-06: Rs.
Balance of Provision for Depreciation on 1st April, 2005 1,16,000
Add: Depreciation provided on Machinery sold 6,400
1,22,400
Less: Accumulated Depreciation on Machinery sold (WN 1) 42,400
Accumulated Depreciation on the remaining Machinery 80,000
Cost of Remaining Machinery (Rs. 5,00,000 – Rs. 1,00,000) 4,00,000
Less: Accumulated Depreciation on remaining Machinery (As above) 80,000
3,20,000
Depreciation provided during 2005-06 = Rs. 3,20,000 x 20/100 = Rs. 64,000.

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 Answer 6:
(a) BALANCE SHEET (as at 1st April, 2016)
Liabilities Rs. Assets Rs.
Capital Fund (Balancing Figure) 64,900 Cash in hand 4,400
Outstanding Subscription
(Rs. 1500+1,000) 2,500
Furniture 40,000
9% Investments
(Face Value Rs. 20,000) 18,000
64,900 64,900

INCOME AND EXPENDITURE ACCOUNT

Dr. for the year ending 31 st March, 2017 Cr.
Expenditure Rs. Income Rs.
To Salaries 44,000 By Subscriptions 96,000
Add: 4,000 (1 /2 M){ 48,000 Add: Outstanding
To Drama Expenses 18,400 for the year 2016-
2017(1) 4,000 1,00,000
To Newspapers 2,500 By Entrance 8,000
To Municipal Taxes 3,600 By Sale of Drama 24,000
Tickets
To Refreshments 32,200 By Sale of waste 150
paper
To Lighting and 6,000 By Interest on
Heating Investments 1,350
To Medicines Add: Accrued 450 1,800
Consumed: Interest
Purchases during the (See Note3)
Year 4,000
Less: Closing Stock 1,000 3,000
To Depreciation on
Furniture:
On Rs. 40,000 for 4,000
one year
On Rs. 10,000 for 3
months 250 4,250
To Excess of Income 16,000
over Expenditure
1,33,950 1,33,950

Liabilities Rs. Assets Rs.

Outstanding Salary (1/2 M){ 4,000 Cash in Hand 19,200
Subscription received (1/2 M){ 500 Outstanding
in advance Subscriptions
Sports Fund 15,000 (Rs. 4,000 + Rs. 1,000(2) 5,000
Less: Sports Expenses (1/2 M){ 4,000 Accrued Interest 450
11,000 Stock of Medicines 1,000
Capital Fund (1/2 M){ 64,900 investment
Add : Excess of Income (Face value Rs. 20,000) 18,000
Over expenditure 16,000 80,900 Furniture 50,000
(1 M) Less: Depreciation 4,250 45,750
89,400 89,400

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 Notes:
(1) Total members are 200, each paying an annual subscription of Rs 500.
Hence, total subscriptions receivable during the year 2016-2017:
200 x Rs. 500= 1,00,000
Less: Amount received during the year 2016-2017 96,000
Outstanding Subscriptions for the year 2016-2017 4,000
(2) The outstanding subscription for 2015-2016 Rs. 1,000 is still in arrear at the end of
2016-2017 also. Hence, it will be shown on the assets side of the both year's Balance
Sheets.
(3) Interest is always calculated on the face value of Investments. Hence, Interest @9%
on Rs 20,000= Rs. 1,800 Out of this amount Rs. 1,350 has been received and the
remaining Rs. 450 is accrued.

Answer:
(b) Journal of BPL Limited
Date Rs. Rs.
2021 Particulars
Bank A/c (Note 1 – Column 3) Dr. 14,20,000
July 1 To Equity Share Application A/c 14,20,000
(Being application money received on
7,10,000 shares @ Rs. 2 per share)
July 10 Equity Share Application A/c Dr. 14,20,000
To Equity Share Capital A/c 4,00,000
To Equity Share Allotment A/c (Note 1 8,60,000
Column 5)
To Bank A/c (Note 1 – Column 6) 1,60,000
(Being application money on 2,00,000 shares
transferred to Equity Share Capital Account;
on 4,30,000 shares adjusted with allotment
and on 80,000 shares refunded as per Board’s
Resolution No…..dated…)
Equity Share Allotment A/c Dr. 10,00,000
To Equity Share Capital A/c 2,00,000
To Securities Premium a/c 8,00,000
(Being allotment money due on 2,00,000
shares @ Rs. 5 each including premium at Rs. 4
each as per Board’s Resolution No….dated….)
Bank A/c (Note 1 – Column 8) Dr. 1,40,000
To Equity Share Allotment A/c 1,40,000
(Being balance allotment money received)

2022 Equity Share Final Call A/c Dr. 14,00,000

To Equity Share Capital A/c 14,00,000
(Being final call money due on 2,00,000 shares
@ Rs. 7 per share as per Board’s Resolution
No…..dated….)
April 30 Bank A/c Dr. 14,00,000
To Equity Share Final Call A/c 14,00,000
(Being final call money on 2,00,000 shares @
Rs. 7 each received)

OR

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 Answer:
(b) Calculation of number of equity shares to be allotted
Number of
debentures
Total number of debentures 40,000
Less: Debenture holders not opted for conversion (5,000)
Debenture holders opted for conversion 35,000
Option for conversion 20%
Number of debentures to be converted (20% of 35,000) 7,000
Redemption value of 7,000 debentures at a premium of 5% Rs. 7,35,000
[7,000 x (100 + 5)]

Equity shares of Rs. 10 each issued on conversion

[Rs. 7,35,000/ Rs. 15] 49,000 shares

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