Class 12 Accountancy Chapter 10- Redemption of Debentures

Ts Grewal Solutions for Class 12 Accountancy Vol 2 Chapter 10:

TS Grewal Solutions for Class 12 Accountancy Chapter 10- Redemption of Debentures is an elementary concept to be learned by the students. Click here to learn more about TS Grewal Accountancy solutions for class 12 in a simple and a step by step method, which is beneficial for the students to score well in their upcoming board exams.

Board CBSE
Class Class 12
Subject Accountancy
Chapter Chapter 10
Chapter Name Redemption of Debentures
Number of questions solved 07
Category TS Grewal

TS Grewal Solutions for Class 12 Accountancy Chapter 10 – Redemption of Debentures

Question 1

The provisions of the Companies Act, 2013 in respect of redemption of debentures are to protect the interest of,

  • Debentureholders
  • Creditors
  • Shareholders
  • Bankers

Answer : Debentureholders

Question 2

Central Bank Ltd. is to redeem 40,000. 10% debentures of ₹. 100/- each on 31st December 2018. How much amount should it invest in specified securities?

  • ₹. 6,00,000/-
  • ₹. 10,00,000/-
  • ₹. 5,00,000/-
  • Nil

Answer : ₹. 6,00,000/-

Question 3

SBI Ltd. has outstanding 1,00,000; 10% debentures ₹.10/- each issued in 2005 due for redemption on 30th June 2018. How much amount of debentures redemption reserve must be created before the redemption of debentures begins and also how much amount should it invest in specified securities? Pass the necessary journal entries at the time of redemption of debentures.
Solution:
JOURNAL OF SBI LTD.

Date Particulars L.F. Dr. (₹) Cr. (₹)
June 30 2018 10% Debentures a/c Dr. To Debentureholders’ a/c (Being the amount due to debenture holders on redemption) 10,00,000 10,00,000
Debentureholders’ a/c Dr. To Bank a/c (Being the amount due to the debenture holders paid) 10,00,000 10,00,000

Question 4

ABC Ltd. issued 1,00,000; 9% debentures of ₹.50/- each @ a premium of 10% on June 30th, 2016 redeemable on 31st March, 2018. The issue was fully subscribed. The company decided to transfer the amount to DRR on 31st March 2017 and invest in Fixed Deposit earning interest @ 10% p.a. on 1st April 2017 to meet the legal requirement. The tax was deducted at source (TDS) by the bank @ 10%. Pass the necessary journal entries for issue and redemption of debentures along with the interest on the investment.
Solution:
JOURNAL

Date Particulars L.F. Dr. (₹) Cr. (₹)
June 30, 2016 Bank a/c Dr. To Debentures Application and Allotment a/c (Being the application money received at a premium of 10%) 55,00,000 55,00,000
June 30 Debentures Application and Allotment a/c Dr. To 9% Debentures a/c To Securities Premium Reserve a/c (Being the application money transferred to 9% debentures and securities premium reserve account) 55,00,000 50,00,000 5,00,000
March 31, 2017 Surplus, i.e., Balance in statement of P&L a/c Dr. To Debentures redemption reserve a/c (Being 25% of the value of outstanding debentures transferred to DRR) 12,50,000 12,50,000
April 1 Debentures redemption investment a/c Dr. To Bank a/c (Being 15% of the value of debentures to be redeemed invested in Government securities) 7,50,000 7,50,000
March 31, 2018 Bank a/c Dr. TDS collected a/c Dr. To Debentures redemption investment a/c To Interest earned a/c (Being the investments bearing 10% interest p.a. realised on redemption of debentures; TDS deducted @ 10% on interest) 8,17,500 7,500 7,50,000 75,000
March 31 9% Debentures a/c Dr. To Debentureholders’ a/c (Being the amount due on redemption of debentures) 50,00,000 50,00,000
March 31 Debentureholders’ a/c Dr. To Bank a/c (Being the payment made to redeem the debentures) 50,00,000 50,00,000
March 31 Debentures redemption reserve a/c Dr. To General reserve a/c (Being the DRR transferred to general reserve after redemption of debentures) 12,50,000 12,50,000
March 31 Interest earned a/c Dr. To Statement of P&L a/c (Being the interest earned on DRI transferred to the statement of P&L) 75,000 75,000

Question 5

Premium payable on redemption of debentures is in the nature of,

  • Liability account
  • Asset account
  • Expense account
  • None of these

Answer : Liability account

Question 6

A public limited company is a manufacturer of chemical fertilisers. It’s annual turnover is ₹. 50 crores. The company had issued 5,000, 12% debentures of ₹. 500/- each at par. Calculate the amount of debentures redemption reserve which needs to be created to meet the requirements of law.
Answer : Required Debentures Redemption Reserve (DRR) = ₹. 6,25,000/-

Question 7

On March 31st 2013, P Ltd. had ₹.8,00,000/-; 9% debentures due for redemption. The company had a balance of ₹. 1,40,000/- in its DRR. Pass the journal entries for the redemption of reserves.

Answer: Amount transferred to DRR – ₹. 60,000;

Investment in specified securities (DRI) – ₹.1,20,000/- The above-provided solutions are considered to be the best solution for ‘TS Grewal Solutions for Class 12 Accountancy Chapter 10- Redemption of Debentures’. Stay tuned to BYJU’S to learn more and score well in the upcoming board examinations.