Debenture Redemption Reserve

Q.

What is meant by a 'Irredeemable Debenture'?

Q.

Explain the guidelines of SEBI for creating Debenture Redemption Reserve.

Q.

As per SEBI Guidelines, an amount equal to _____ of the debenture issue must be transferred to Debenture Redemption Reserve before redemption begins.

1. 50%

2. 80%

3. 25%

4. 100%

Q.

Under which head is the ‘Debenture Redemption Reserve’ shown in the Balance Sheet?

Q.

How much amount atleast should be transferred to Debenture Redemption Reserve, if the Debenture value in the balance sheet is Rs 15, 00, 000?

1. 3500

2. 350000

3. 375000

4. 37500

Q.

Where a company creates a Debenture Redemption Reserve for the redemption of such debentures, the amount shall be credited, out of its ___every year until such debentures are redeemed.

1. None of these

2. Investments

3. Profits

4. Reserves

Q. Unearned income is shown ___________________.

1. By way of addition in the income statement
2. As a current liability
3. As a current Asset
4. As a fixed Asset

Q.

What is a ‘Convertible Debenture’?

Q.

As per the provisions of the Companies Act, 2013, the company must set aside a portion of profits every year and transfer it to___for redemption of debentures until the debentures

1. Debenture redemption reserve

2. Redemption of debentures reserve

3. Any Reserve

4. None of these

Q. Following is the financial statement of Garima Ltd., prepare cash flow statement.
Balance Sheet
As on 31st December, 2011
$$\begin{array}{cccccc}\text{Capital and Liabilities}& \text{2010 (Rs.)}& \text{2011 (Rs.)}& \text{Assets}& \text{2010 (Rs.)}& \text{2011 (Rs.)}\\ \text{Equity Share Capital}& 2,00,000& 3,00,000& \text{Plant and Machinery}& 2,00,000& 3,64,000\\ \text{Preference Share Capital}& 80,000& 1,40,000& \text{Stock}& 60,000& 1,60,000\\ \text{Creditors}& 56,000& 1,56,000& \text{Debtors}& 20,000& 80,000\\ \text{Provision for Taxation}& 4,000& 12,000& \text{Bank}& 80,000& 28,000\\ \text{Profit}\&\text{Loss Account}& 28,000& 40,000& \text{Prepaid Expenses}& 8,000& 16,000\\ & \overline{\underset{–}{3,68,000}}& \overline{\underset{–}{6,48,000}}& & \overline{\underset{–}{3,68,000}}& \overline{\underset{–}{6,48,000}}\end{array}$$

Profit and Loss Account
for the year ended December 31, 2011

$$\begin{array}{cccc}\text{Particulars}& \text{Amt. (Rs.)}& \text{Particulars}& \text{Amt. (Rs.)}\\ \text{Opening Stock}& 60,000& \text{Sales}& 5,00,000\\ \text{Purchase}& 4,92,000& \text{Closing Stock}& 1,60,000\\ \text{Gross Profit c/d}& 1,08,000& & \\ & \overline{\underset{–}{6,60,000}}& & \overline{\underset{–}{6,60,000}}\\ \text{Salary}& 44,000& \text{Gross Profit b/d}& 1,08,000\\ \text{Depreciation}& 32,000& & \\ \text{Provision for Tax}& 16,000& & \\ \text{Net Profit c/d}& 16,000& & \\ & \overline{\underset{–}{1,08,000}}& & \overline{\underset{–}{1,08,000}}\\ \text{Dividend}& 4,000& \text{Balance b/d}& 28,000\\ \text{Balance c/d}& 40,000& \text{Net Profit b/d}& 16,000\\ & \overline{\underset{–}{44,000}}& & \overline{\underset{–}{44,000}}\end{array}$$

Q.

The amount credited to the Debenture Redemption Reserve shall not be utilised by the company except for the purpose of redemption of debentures.

1. False

2. True

Q. Objective type questions.
Answer in are sentence only.

What do you mean by Bearer Debenture?

Q.

Debenture Redemption Reserve ensures that the _____________ amount of the debenture holders is safeguarded.

1. Principal loan

2. Interest

3. Both principal loan and interest

4. None of these

Q.

Which account is to be credited while setting aside profits as a reserve?

1. Profit or loss A/c

2. Debenture Redemption Reserve A/c

3. Debenture Redemption Investment A/c

4. Bank A/c

Q. Kiran is a sole proprietor. Over the past decade, her business has grown from operating a neighborhood corner shop selling accessories such as artificial jewelry bags, hair clips and nail art to a retail chain with three branches in the city. Although she looks after the varied functions in all the branches, she is wondering whether she should form a company for better management of the business. She also has plans to open branches countrywide.
(a) Explain two benefits of remaining a sole proprietor.
(b) Explain two benefits of converting it to a joint stock company.
(c) What role will her decision to go nationwide play in her choice of form of the organisation?
(d) What legal formalities will she have to undergo to operate business as a company?

Q. When the goods are returned to the supplier, a ______ is sent to him.

1. Credit note
2. Thank you note
3. Debit note
4. All of the above

Q.

Which account is to be credited while investing 15% of the Reserve amount?

1. Profit or loss A/c

2. Debenture Redemption Reserve A/c

3. Debenture Redemption Investment A/c

4. Bank A/c

Q. Which of the following conditions should be satisfied to redeem the preference shares?

1. No such shares be redeemed unless they are fully paid.
2. Where shares are redeemed out of profits, a sum equal to nominal value of shares redeemed must be transferred to Capital Redemption Reserve.
3. Capital Redemption Reserve is available only for issue of fully paid bonus shares.
4. All the above

Q. Debenture Redemption Reserve ensures that the principal loan of the debenture holders is safeguarded.

1. False
2. True

Q. What journal entry is passed for transfer to capital redemption reserve account?

1. Dividend Equalization fund accoint Dr.
   Capital Redemption Reserve Account Cr.
2. All of the above
3. General Reserve Dr.
   Capital Redemption Reserve Account Cr.
4. Profit & Loss Account Dr.
   Capital Redemption Reserve Account Cr.

Q. The balance of Capital Redemption Reserve Account is available for ___________.

1. redemption of redeemable preference shares
2. redemption of redeemable debentures
3. re-organisation of share capital
4. issue of bonus shares

Q. pass necessary journal entiresfor issue of debenturesin the following cases:
1 when company issues 10009% debentures of rs100each at par and redeemable at par
2 when company issues 10009% debentures at par and redemableat a premium of 10%

Q. Discuss the following methods of debt redemption:
Refunding

Q. Which of the following cannot be used for the purpose of creation of capital redemption reserve account?

1. Profit and Loss Account (credit balance).
2. General Reserve.
3. Dividend Equalization Reserve.
4. Unclaimed Dividends.

Q. 'Proposed dividends' is shown in the balance sheet of a company under the head of _________.

1. Provisions
2. Reserves and Surplus
3. Current liabilities
4. Other liabilities

Q. "Proposed dividends" is shown in the balance sheet of a company under the head _______.

1. Provisions
2. Reserves and Surplus
3. Current Liabilities
4. Other Liabilities

Q. what is the difference between Debenture and debenture certificate

Q. The issue price and redemption value of debentures cannot differ.

1. True
2. False

Q. Which of the following accounts can not be transferred to capital redemption reserve account?

1. Dividend equalisation account
2. General reserves
3. Profit and loss appropriation account
4. Securities premium reserves