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Issue and
Redemption of
Debentures Class 12
Important Questions
and Answers
Accountancy Chapter
7
August 8, 2022 by Bhagya

We have given these Accountancy Class 12

Important Questions and Answers Chapter 7 Issue
and Redemption of Debentures to solve different
types of questions in the exam. Go through these
Class 12 Accountancy Chapter 7 Issue and
Redemption of Debentures Class 12 Important
Questions and Answers Solutions & Previous Year
Questions to score good marks in the board
examination.

Issue and Redemption of

Debentures Important
Questions Class 12
Accountancy Chapter 7
Question 1.
What is meant by ‘Issue of Debentures as Collateral
Security’ ₹ (All India 2019: CBSE 2018)
Answer:
When a company issues debentures to the lender as
secondary or collateral security, such an issue of
debenture is known as debenture issued as collateral
security.

Question 2.
X Ltd invited applications for issuing 500, 12%
debentures of ₹ 100 each at a discount of 5%. These
debentures were redeemable after three years at par.
Applications for 600 debentures were received. Pro-
rata allotment was made to all the applicants. Pass
necessary journal entries for the issue of debentures
assuming that the whole amount was payable with
application. (All India 2017)
Answer:

Question 3.
X Ltd invited applications for issuing 1,000, 9%
debentures of ₹ 100 each at a discount of 6%.
Applications for 1,200 debentures were received. Pro-
rata allotment was made to all the applicants.
Pass necessary journal entries for the issue of
debentures assuming that the whole amount was
payable with application. (Delhi 2017)
Solve as Q no. 2 on page 349.
Discount on Issue of Debentures = ₹ 6,000; Amount
Refunded = ₹ 18,800

Question 4.
Give the meaning of ‘debenture’. (Delhi 2014)
Or
What is meant by debenture ₹ (Delhi 2014)
Answer:
It means a document showing a company’s
indebtedness, issued under the seal of the company
and containing a contract for the repayment of the
principal sum at a specided date with interest at a
dxed rate.

Question 5.
Give the meaning of a bond. All India (C) 2014
Answer:
Bond is an instrument of acknowledgement of debt,
but it does not carry a pre-determined rate of interest.

Question 6.
Give the meaning of issue of debentures as collateral
security. (All India 2011)
Or
What is meant by issue of debentures as a collateral
security ₹ (All India 2014, 2013(C))
Answer:
When a company issues its own debentures to the
lenders as a secondary security in addition to some
other asset already pledged or mortgaged, it is called
issue of debentures as collateral security.

Question 7.
Pass the necessary journal entry when 10,000
debentures of ₹ 100 each are issued as collateral
security against a bank loan of ₹ 8.00.000. (Delhi
2011)
Answer:

Question 8.
Beta Ltd issued 5,000, 9% debentures of ₹ 500 each.
Pass the necessary journal entries for the issue of
debentures in the books of the company in the
following case. When debentures are issued at a
premium of 25% to the vendors for machinery
purchased for ₹ 6,25,000. (Delhi 2011)
Answer:

Question 9.
Garvit Ltd invited applications for issuing 3,000, 11%
Debentures of ₹ 100 each at a discount of 6%. The
full amount was payable on application. Applications
were received for 3,600 debentures. Applications for
600 debentures were rejected and the application
money was refunded. Debentures were allotted to the
remaining applicants. Pass the necessary journal
entries for the above transactions in the books of
Garvit Ltd. (Delhi 2019)
Answer:

Question 10.
On 1st April, 2015, P Ltd issues 6,000, 12%
Debentures of ₹ 100 each at par redeemable at a
premium of 7%. The debentures were to be
redeemed at the end of third year. Prepare loss on
issue of 12% Debentures Account. (Delhi 2019)
Answer:

Question 11.
UZ Ltd purchased plant and machinery from Elk
Machine Ltd for ₹ 6,90,000. Elk Ltd was paid by
accepting a draft of ₹ 90,000 payable after three
months and the balance by issue of 6% debentures
of ₹ 100 each at a discount of 20%. Pass necessary
journal entries for the above transactions in the
books of UZ Ltd. (All India 2019)
Answer:

Working Notes:
6,00,000
Number of debentures Issued = 100−20 = 7,500
debentures

Question 12.
Disha Ltd purchased machinery from Nisha Ltd and
paid to Nisha Ltd as follows
(i) By issuing 10,000, equity shares of ₹ 10 each at a
premium of 10%.
(ii) By issuing 200, 9% debentures of ₹ 100 each at a
discount of 10%.
(iii) Balance by accepting a bill of exchange of ₹
50,000 payable after one month.
Pass necessary journal entries in the books of Disha
Ltd. For the purchase of machinery and making
payment to Nisha Ltd. (All india 2017)
Answer:

Working Note:
Purchase Price = (10,000 × 11) + (200 × 90)+50,000 =
1,10,000 + 18,000 + 50,000 = ₹ 1,78,000

Question 13.
Z Ltd purchased machinery from K Ltd, Z Ltd, paid K
Ltd as follows
(i) By issuing 5,000 equity shares of ₹ 10 each at a
premium of 30%.
(ii) By issuing 1,000, 8% debentures of ₹ 100 each at
a discount of 10%.
(iii) Balance by giving a promissory note of ₹ 48,000
payable after two months.
Pass necessary journal entries for the purchase of
machinery and payment to K Ltd in the books of Z
Ltd. (Delhi 2017)
Answer:
Solve as Q no. 12 on page 352.
Purchase Consideration = ₹ 2,03,000

Question 14.
Fill in the blanks in the following case. (All India (C)
2016)

Answer:

Working Notes:
20,00,000
Number of debentures Issued = 150−50 = 20,000
debentures

Question 15.
Fill in the blanks in the following case. (Delhi (C)
2016)

Answer:
Solve as Q no. 14 on page 353; Number of
Debentures Issued = 15,000; Capital Reserve = ₹
1,00,000

Question 16.
Tata Ltd issued 5,000, 10% debentures of ₹ 100 each
on 1st April, 2012. The issue was fully subscribed.
According to the terms of issue, interest on
debentures is payable half yearly on 30th September
and 31st March and tax deducted at source is 10%.
Pass the necessary entries related to the debenture
interest for the half yearly ending on 31st March,
2013 and transfer of interest on debentures to
statement of prodt and loss. (All India 2014)
Answer:

Question 17.
BG Ltd issued 2,000, 12% debentures of ₹ 100 each
on 1st April, 2012. The issue was fully subscribed.
According to the terms of issue, interest on the
debentures is payable half yearly on 30th September
and 31st March and the tax deducted at source is
10%. Pass necessary journal entries related to the
debenture interest for the half-yearly ending 31st
March, 2013 and transfer of interest on debentures of
the year to the statement of prodt and loss. (Delhi
2014)
Answer:
Solve as Q no. 16 on page 354.
Interest on Debenture Transferred to Statement of
Prodt and Loss = ₹ 24,000

Question 18.
Sargam Ltd issued ₹ 1,00,000, 6% debentures of ₹ 10
each at a premium of ₹ 2 per on 1st April, 2012. The
issue was fully subscribed. Interest will be paid at the
end dnancial year. Pass necessary journal entries for
the year 2012-13. (All India 2014)
Answer:

Question 19.
Nav Lakshmi Ltd invited applications for issuing
3,000, 12% debentures of ₹ 100 each at a premium of
₹ 50 per debenture. The full amount was payable on
application. Applications were received for 4,000
debentures. Applications for 1,000 debentures were
rejected and application money was refunded.
Debentures were allotted to the remaining applicants.
Pass necessary journal entries for the above
transactions in the books of Nav Lakshmi Ltd. (All
India 2012)
Answer:

Question 20.
Narain Laxmi Ltd invited applications for issuing
7,500, 12% debentures of ₹ 100 each at a premium of
₹ 35 per debenture. The full amount was payable on
application.
Applications were received for 10,000 debentures.
Applications for 2,500 debentures were rejected and
the application money was refunded. Debentures
were allotted to the remaining applicants.
Pass necessary journal entries for the above
transactions in the books of Narain Laxmi Ltd. (Delhi
2012)
Answer:
Solve as Q no. 19 on page 355.

Question 21.
Venus Ltd is a real estate company. To discharge its
corporate social responsibility, it decided to construct
a night shelter for the homeless. The company took
over assets of ₹ 10,00,000 and liabilities of ₹ 1,80,000
of Cayns Ltd for ₹ 7,60,000. Venus Ltd issued 9%
debentures of ₹ 100 each at a discount of 5% in full
satisfaction of the purchase consideration in favour
of Cayns Ltd.
Pass necessary journal entries in the books of Venus
Ltd. for the above transactions. (Comportment 2018
Modided)
Answer:

Working Notes:
7,60,000
Number of debentures Issued = 100−5 = 8,000
debentures, 9% debentures

Question 22.
Boots Ltd issued ₹ 6,0,000, 8% debentures at a
discount of 6%. The debentures were redeemable in
four equal annual instalments. Pass necessary
journal entries for issue of debentures and prepare
‘Discount on issue of debentures account’ for four
years. Show your workings clearly.
Answer:

Working Notes:
Calculation of amount of discount to be written off
every year

Question 23.
‘Ananya Ltd’ had an authorised capital of ₹
10,00,00,000 divided into 10,00,000 equity shares of ₹
100 each. The company had already issued 2,00,000
shares. The dividend paid per share for the year
ended 31st March, 2007 was ₹ 30.
The management decided to export its products to
African countries. To meet the requirements of
additional funds, the dnance manager put up the
following three alternate proposals before the Board
of Directors.
(a) Issue 47,500 equity shares at a premium of ₹ 100
per share.
(b) Obtain a long-term loan from bank which was
available at 12% per annum.
(c) Issue 9% debentures at a discount of 5%.
After evaluating these alternatives the company
decided to issue 1,00,000, 9% debentures on 1st
April, 2008. The face value of each debenture was ₹
100. These debentures were redeemable in four
instalments starting from the end of third year, which
was as follows

Year Amt (₹)

III 10,00,000

IV 20,00,000

V 30,00,000

VI 40,00,000

Prepare 9% debentures account from 1st April, 2008

till all the debentures were redeemed. (All India 2016)
Answer:

Question 24.
Pass necessary journal entries and prepare 9%
debentures account for the issue of 7,500, 9%
debentures of ₹ 50 each at a discount of 6%,
redeemable at a premium of 10%. (All Indio 2019)
Answer:

Question 25.
X Ltd issued 1,000, 9% Debentures of ₹ 100 each at a
discount of 6%. These debentures were redeemable
at a premium of 10% after dve years.Pass necessary
journal entries for issue of debentures and prepare
9% Debentures Account. (All India 2019)
Answer:
Solve as Q. no. 1 on page 360. Loss on Issue of
Debentures = ₹ 16,000 9% Debentures Account
Balance = ₹ 1,00,000

Question 26.
On 1st April, 2018,Learning
Online RJ Ltd issued ₹ 10,00,000, 9%
Platform
debentures of ₹ 100 each at a discount of 10%.
These debentures were redeemable at a premium of
5% after four years. Pass necessary journal entries