Issue & Redemption of Debentures – Corporate and Management Accounting MCQ

Going through the Issue & Redemption of Debentures – Corporate and Management Accounting CS Executive MCQ Questions with Answers you can quickly revise the concepts.

Issue & Redemption of Debentures – Corporate and Management Accounting MCQs

Question 1.
When face value of debentures is more than issue price then debentures are said to be issued at-
(A) Premium
(B) Discount
(C) Par
(D) None of above
Answer:
(B) Discount

Question 2.
Premium on issue of debentures must be treated as -…………
(A) Revenue Receipt
(B) Deferred Revenue Receipt
(C) Capital Receipt
(D) Capital Loss
Answer:
(C) Capital Receipt

Question 3.
Premium on issue of debentures must be credited to a separate account called: -………..
(A) Debentures Premium Account
(B) Securities Premium Account
(C) Discount on Issue of Debentures
(D) Debentures Profit Account
Answer:
(B) Securities Premium Account

Question 4.
Which of the following type of security can be issued at discount as per Companies Act, 2013
(1) Equity Shares
(2) Sweat Equity Shares
(3) Preference Shares
(4) Debentures
(5) Bonds
Select the correct answer from the options given below -………..
(A) (1) & (3) only
(B) (1), (3) & (4) only
(C) (2), (4) & (5) only
(D) (3), (4) & (5) only
Answer:
(C) (2), (4) & (5) only

Question 5.
The discount on issue of debentures must be treated as -………..
(A) Revenue Loss
(B) Deferred Revenue Receipt
(C) Capital Receipt
(D) Capital Loss
Answer:
(D) Capital Loss

Question 6.
In case of over subscription of debentures each applicant receives the debentures in some proportion, it is known as -………..
(A) Bonus allotment
(B) Right allotment
(C) Per applicant allotment
(D) Pro rata allotment
Answer:
(D) Pro rata allotment

Question 7.
Which of the following security can be forfeited for non-payment of allotment or call money
(I) Equity Shares
(II) Equity Shares, Preference Shares
(III) Preference Shares, Equity Shares & Debentures
(IV) Debentures
Select the correct answer from the options given below –
(A) (I) only
(B) (III) only
(C) (I) & (IV) only
(D) (II) only
Answer:
(D) (II) only

Question 8.
Which of the following security cannot be forfeited for non-payment of allotment or call money
(A) Equity shares
(B) Preference shares
(C) Debentures
(D) Both (A) & (B)
Answer:
(C) Debentures

Question 9.
If a company receives excess application money and the application money equal to debentures issued transferred to 5% Debentures A/c and application money received on excess debentures – some money is adjusted and against allotment and remaining was refunded, then which of the following entry is correct
(A)

Answer:
(B)

Question 10.
Debenture holders are the of the …….. company.
(A) Creditors
(B) Owners
(C) Quasi owner
(D) Deemed owner
Answer:
(A) Creditors

Question 11.
Debenture holders -………..
(A) Have voting rights if interest is not paid for more than 3 years
(B) Have voting rights if interest is not paid for more than 2 years
(C) Have no voting rights
(D) Have voting rights
Answer:
(C) Have no voting rights

Question 12.
Debentures may be issued at -………..
(A) Par
(B) Premium
(C) Discount
(D) Any of above
Answer:
(D) Any of above

Question 13.
Debenture interest is paid at a pre-determined while dividend on equity shares is paid at a…………
(A) Variable Rate, Bank Rate
(B) Variable Rate, Fixed Rate
(C) Fixed Rate, Variable Rate
(D) Fixed Rate, Bench Mark Rate
Answer:
(C) Fixed Rate, Variable Rate

Question 14.
Interest on debentures is the ………. against profits.
(A) Appropriation
(B) Charge
(C) Transfer
(D) None of above
Answer:
(B) Charge

Question 15.
In the company’s balance sheet, debentures are shown under the head –
(A) Secured Loans
(B) Non-Current Liabilities
(C) Current Liabilities
(D) Capital Employed
Answer:
(B) Non-Current Liabilities

Question 16.
Debentures …………. converted into shares as per the terms of issue of debenture.
(A) Can be
(B) Cannot be
(C) Both (A) & (B)
(D) If permitted by SEBI
Answer:
(A) Can be

Question 17.
Debentures …………. for feited for non payment of call moneys.
(A) Can be
(B) Cannot be
(C) Both (A) & (B)
(D) None of above
Answer:
(B) Cannot be

Question 18.
At the time of liquidation, debenture holders are paid-off …………. the shareholders
are paid.
(A) Before
(B) After
(C) At the same time
(D) None of above
Answer:
(A) Before

Question 19.
If the debentures are issued at a price higher than the nominal value of the debentures, the premium should be credited to ……………
(A) General Reserve
(B) Securities Premium Account
(C) Reserve Capital
(D) Profit & Loss Account
Answer:
(B) Securities Premium Account

Question 20.
Discount on issue of debentures is -……….
(A) Revenue loss
(B) Capital profit
(C) Capital loss
(D) Capital receipt
Answer:
(C) Capital loss

Question 21.
Debentures may be issued by a company for -……………..
(A) Cash
(B) Consideration other than cash
(C) As a collateral security
(D) Any of above
Answer:
(D) Any of above

Question 22.
The company may allot debentures to the vendors for acquiring some assets as payment for purchase consideration, such issue of debentures to vendors is known as issue of debentures for –
(A) Cash
(B) Consideration other than cash
(C) With consideration
(D) Without consideration
Answer:
(B) Consideration other than cash

Question 23.
If the value of debentures allotted to vendors for acquiring some assets as payment for purchase consideration is more than the agreed purchase price, the difference is credited to:
(A) Capital reserve account
(B) Debenture suspense account
(C) Goodwill account
(D) Profit & loss account
Answer:
(C) Goodwill account

Question 24.
If the value of debentures allotted to vendors for acquiring some assets as payment for purchase consideration is less than the agreed purchase price, the difference is debited to –
(A) Capital reserve account
(B) Debenture suspense account
(C) Goodwill account
(D) Profit & loss account
Answer:
(A) Capital reserve account

Question 25.
When debentures are issued as collateral security which of the following accounting treatment can be adopted
(A) No accounting entry is required to issue debentures as collateral security.
(B) Pass following entry for issue debentures as collateral security.
Debentures Suspense A/c …………. Dr.
To Debentures A/c

(C) (A) or (B)
(D) None of above
Answer:
(C) (A) or (B)

Question 26.
Which of the following statements is TRUE
(A) A debenture holder is an owner of the company.
(B) A debenture holder can get his money back only on the liquidation of the company.
(C) A debenture issued at a discount can be redeemed at a premium.
(D) A debenture holder receives interest only in the event of profits.
Answer:
(C) A debenture issued at a discount can be redeemed at a premium.

Question 27.
Premium on redemption of debentures account appearing in the balance sheet is………….
(A) A real account
(B) A nominal account – income
(C) A personal account
(D) A nominal account – expenditure
Answer:
(C) A personal account

Question 28.
Which of the following statements is FALSE
(A) At maturity, debenture holders get back their money as per the terms and conditions of redemption.
(B) Debentures can be forfeited for non-payment of call money.
(C) In company’s balance sheet, debentures are shown under secured loans.
(D) Interest on debentures is charged against profits.
Answer:
(B) Debentures can be forfeited for non-payment of call money.

Question 29.
Which of the following statements is false
(A) A company can issue convertible debentures.
(B) Debentures cannot be secured.
(C) A company can issue redeemable debentures.
(D) Debentures have no right to participate in profits over and above their fixed interest.
Answer:
(B) Debentures cannot be secured.

Question 30.
Debenture interest –
(A) is payable only in case of profits.
(B) Accumulates in case of losses or inadequate profits.
(C) is payable after the payment of preference dividend but before the payment of equity dividend.
(B) Debentures cannot be secured.
Answer:
(B) Debentures cannot be secured.

Question 31.
Which of the following is NOT a characteristic of Bearer Debentures
(A) They are treated as negotiable instruments.
(B) Their transfer requires a deed of transfer.
(C) They are transferable by mere delivery.
(D) The interest on it is paid to the holder irrespective of identity
Answer:
(B) Their transfer requires a deed of transfer.

Question 32.
When debentures are issued as collateral security, the final entry for recording the collateral debentures in the books is:
(A) Credit Debentures A/c. and debit Cash A/c
(B) Debit Debenture suspense A/c and credit Cash A/c
(C) Debit Debenture suspense A/c and credit Debentures A/c
(D) Debit cash A/c and credit the loan A/c for which security is given
Answer:
(C) Debit Debenture suspense A/c and credit Debentures A/c

Question 33.
Debentures can be ……………
I. Mortgage Debentures or Simple Debentures.
II. Registered Debentures or Bearer Debentures.
III. Redeemable Debentures or Irredeemable Debentures.
IV. Convertible Debentures or Non-convertible Debentures
Select the correct answer from the options given below.
(A) Both (I) and (II) above
(B) Both (I) and (HI) above
(C) Both (II) and (III) above
(D) All of (I), (II), (III) and (IV) above
Answer:
(D) All of (I), (II), (III) and (IV) above

Question 34.
Which of the following statements is false
(A) Debenture is a form of public borrowing.
(B) It is customary to prefix debentures with the agreed rate of interest in case of fixed interest.
(C) Debenture interest is a charge against profits.
(D) The issue price and redemption value of debentures cannot differ.
Answer:
(D) The issue price and redemption value of debentures cannot differ.

Question 35.
Interest on debentures is calculated on:-……….
(A) Its face value
(B) Its issue price
(C) Its market price
(D) Its redemption price
Answer:
(A) Its face value

Question 36.
Which of the following is true with regard to 10% Debentures issued at a discount of 20%?
(A) The carrying amount of debentures gets reduced each Year at a rate of 20%.
(B) Issue price and the carrying amount of debentures are equal.
(C) At the time of redemption, the debenture holder will be paid the issue price.
(D) The face value and the carrying amount of debentures are equal.
Answer:
(D) The face value and the carrying amount of debentures are equal.

Question 37.
Discount on issue of debentures is a:………….
(A) Revenue loss to be charged in the year of issue.
(B) Capital loss to be written off from capital reserve.
(C) Capital loss to be written off over the tenure of the debentures.
(D) Capital loss to be shown as goodwill.
Answer:
(C) Capital loss to be written off over the tenure of the debentures.

Question 38.
When debentures are issued as collateral security against any loan then holder of such debentures is entitled to:
(A) Interest only on the amount of loan.
(B) Interest only on the face value of debentures.
(C) Interest both on the amount of the loan and on the debentures.
(D) None of the above.
Answer:
(A) Interest only on the amount of loan.

Question 39.
When debentures are redeemable at different dates, the total amount of discount on issue of debentures should be written off:
(A) Every year by applying the sum of the year’s digit method
(B) Every year by applying the straight line method
(C) To profit and loss account in full in the year of final or last redemption
(D) To profit and loss account in full in the year of first redemption.
Answer:
(A) Every year by applying the sum of the year’s digit method

Question 40.
Non convertible debentures refer to -……….
(A) Owner’s capital
(B) Loan capital
(C) Short term fund
(D) Deferred investment
Answer:
(B) Loan capital

Question 41.
“Interest accrued & due on debentures’’ is shown -……….
(A) Under debentures
(B) As other current liabilities
(C) As provisions
(D) As a reduction of bank balance
Answer:
(B) As other current liabilities

Question 42.
“Interest accrued & not due on debentures” is shown -……….
(A) Under debentures
(B) As current liabilities
(C) As provisions
(D) As a reduction of bank balance
Answer:
(B) As current liabilities

Question 43.
Tax deducted at source on interest on debenture is shown as -……….
(A) Expense
(B) Asset
(C) Liability
(D) Income
Answer:
(C) Liability

Question 44.
Debenture premium cannot be used -……….
(A) Write off the premium on redemption of shares or debenture
(B) Write off the discount on issue of debentures
(C) Pay dividends
(D) Write off capital losses
Answer:
(C) Pay dividends

Question 45.
Debentures can be redeemed out of -………….
(A) Profits
(B) Provisions
(C) Capital
(D) Any of the above
Answer:
(D) Any of the above

Question 46.
Debentures normally cannot be redeemed at -………….
(A) Premium
(B) Discount
(C) Par
(D) All of the above
Answer:
(B) Discount

Question 47.
If debentures are issued at discount and redeemed at premium -………….
(A) Loss on Issue of Debentures A/c is debited
(B) Debentures A/c is credited
(C) Premium on Redemption of Debentures A/c is credited.
(D) All of the above are correct.
Answer:
(D) All of the above are correct.

Question 48.
Profit on cancellation of debentures is transferred to -………..
(A) Capital reserve
(B) Capital redemption reserve
(C) Profit & loss account
(D) General reserve
Answer:
(A) Capital reserve

Question 49.
As a sound accounting policy when debentures are redeemed amount equal to -………..
(A) Redemption price is transferred to profit & loss account.
(B) Original issue price is transferred to general reserve account.
(C) Redemption price is transferred to general reserve account
(D) Face value is transferred to general reserve account
Answer:
(D) Face value is transferred to general reserve account

Question 50.
Statement I:
Debentures can be converted into shares as per the terms of issue of debentures.
Statement II:
Shares cannot be converted into debentures in any circumstances.
Select the correct answer from the options given below –
(A) Statement I is true while Statement II is false.
(B) Statement II is true while Statement I is false.
(C) Statement I and Statement II both are false.
(D) Statement I and Statement II both are true.
Answer:
(D) Statement I and Statement II both are true.

Question 51.
Arrange the priority of payment in case of liquidation of company:
I. Preference shares holders II. Secured creditors
III. Equity shareholders
IV. Unsecured creditors
V. Debenture holders
Select the correct answer from the options given below –
(A) II, IV, V,I, III
(B) II, V, IV, I, III
(C) II, V,I, IV, IV
(D) II,I,III, IV
Answer:
(B) II, V, IV, I, III

Question 52.
Discount on issue of debentures, being a capital loss must be shown -…………..
(A) On the assets side under the heading “Miscellaneous Expenditures”.
(B) As deduction from the “Non-current Liabilities” on the liability side of the balance sheet.
(C) As deduction from the “Shareholders Funds” on the liability side of the balance sheet.
(D) As foot note to balance sheet.
Answer:
(C) As deduction from the “Shareholders Funds” on the liability side of the balance sheet.

Question 53.
Sound business policy demands that discount on issue of debenture should be written off -…………
(A) As quickly as possible
(B) In 5 years
(C) In 10 years
(D) As agreed at the time of issue
Answer:
(A) As quickly as possible

Question 54.
Which of the following is not a method of writing off discount on issue of debentures
(A) Fixed instalment method
(B) Fluctuating instalment method
(C) Adjusted discount policy method
(D) All of the above
Answer:
(C) Adjusted discount policy method

Question 55.
If the company acquires some assets from the vendor and instead of paying the vendor in cash, the company may allots debentures in payment of purchase consideration. In such case if the face value of debentures issued is more than value of assets acquired then difference will be -……………..
(A) Credited to capital reserve account
(B) Debited goodwill account
(C) Credited to premium on debentures account
(D) Credited to profit and loss account
Answer:
(B) Debited goodwill account

Question 56.
If the company acquires some assets from the vendor and instead of paying the vendor in cash, the company may allots debentures in payment of purchase consideration. In such case if the face value of debentures issued is less than value of assets acquired then difference will be -…………
(A) Credited to capital reserve account
(B) Debited goodwill account
(C) Credited to premium on debentures account
(D) Credited to profit and loss account
Answer:
(A) Credited to capital reserve account

Question 57.
Debentures Suspense Account -…………
(A) Is treated as deferred asset account.
(B) Is shown on assets side of the balance sheet under the head ‘Current Assets’.
(C) Is capital loss and must be written off over the tenure of the debentures.
(D) Is shown on assets side of the balance sheet under the head ‘Non-Current Assets’.
Answer:
(D) Is shown on assets side of the balance sheet under the head ‘Non-Current Assets’.

Question 58.
Who of the following is not required to create Debenture Redemption Reserve
(A) All India Financial Institutions
(B) NBFCs
(C) Infrastructure companies
(D) All of the above
Answer:
(A) All India Financial Institutions

Question 59.
Every company required to create DRR shall on or before the 30th day of April in each year, invest or deposit, as the case may be, a sum which shall not be less than of the amount of its debentures maturing during the year ending on the 31st day of March of the next year
(A) 100%
(B) 50%
(C) 25%
(D) 15%
Answer:
(D) 15%

Question 60.
An other name of Debenture Redemption Fund Method is –
(A) Sum of year digit method
(B) Depreciation fund method
(C) Double decline method
(D) None of the above
Answer:
(D) None of the above

Question 61.
An other name of Debenture Redemption Fund Method is –
(A) Redemption Fund Method
(B) Sinking Fund Method
(C) Both (A) and (B)
(D) Neither (A) nor (B)
Answer:
(C) Both (A) and (B)

Question 62.
Debenture redemption fund investment account will appear on the assets side of the balance sheet under the head while debenture redemption fund account will appear on the liabilities side under the head
(A) Reserves & Surplus; Non-Current Assets
(B) Non-Current Assets; Reserves & Surplus
(C) Investments; Reserves & Surplus
(D) Current Assets; Non-Current Liabilities
Answer:
(B) Non-Current Assets; Reserves & Surplus

Question 63.
Which of the following is correct journal entry for annual contribution to sinking fund created for redemption of debentures

Answer:
(C)

Question 64.
Loss on sale of Debenture Redemption Fund Investment account must be set-off against -…………
(A) Profit & loss account
(B) General reserve account
(C) Sinking fund account
(D) All of the above
Answer:
(C) Sinking fund account

Question 65.
If the purchase price for the debentures includes interest for the expired period, the quotation is said to be -…………
(A) Ex-interest
(B) Cum-interest
(C) Carrying interest
(D) Sinking interest
Answer:
(C) Carrying interest

Question 66.
If nothing is stated, purchase & sale of debentures, government securities should be taken to be on -…………
(A) Cum-interest
(B) Ex-interest basis
(C) (A) or (B) at the option of seller
(D) (A) or (B) at the option buyer
Answer:
(B) Ex-interest basis

Question 67.
Which of the following statement is true (✓) and which is false (X)?
P. A debenture holder receives interest only in the event of profits.
Q. A debenture issued at discount originally cannot be redeemed at premium.
R. Debenture holder is owner of the company.
S. A debenture holder can get back is money only at the time of liquidation.
Select the correct answer from the options given below –

Answer:
(D)

Question 68.
If debentures are issued at discount but redeemable at premium then -…………
(A) Loss on Issue of Debentures A/c will be credited
(B) Debentures A/c will be debited
(C) Loss on Issue of Debentures A/c will be debited
(D) Premium on Redemption of Debentures A/c will be debited
Answer:
(C) Loss on Issue of Debentures A/c will be debited

Question 69.
Debenture issued at par but redeemable at price less than face value then -…………
(A) Loss must be debited to Loss on Issue of Debenture A/c
(B) Profit on redemption will be ignored and Bank A/c and Debentures A/c both will be recorded at face value.
(C) Premium on Redemption of Debenture A/c must be credited.
(D) None of the above
Answer:
(B) Profit on redemption will be ignored and Bank A/c and Debentures A/c both will be recorded at face value.

Question 70.
Correct entry to transfer interest received on sinking fund investment is -…………
(A) Debit Interest on Sinking Fund Investment A/c and Credit Profit & Loss A/c
(B) Debit Profit & Loss A/c and Credit Interest on Sinking Fund Investment A/c
(C) Debit Interest on Sinking Fund Investment A/c and Credit Sinking Fund A/c
(D) Debit Sinking Fund A/c and Credit Interest on Sinking Fund Investment A/c
Answer:
(C) Debit Interest on Sinking Fund Investment A/c and Credit Sinking Fund A/c

Question 71.
ZPA Ltd. issued 10,000,12% Debentures of ₹ 100 each at per payable in full on application by 1st April, 2019. Applications were received for 11,000 Debenture. Debentures were allotted on 7th April, 2019. Excess money was refunded. Amount that will appear in balance sheet as “12% Debenture” = ?
(A) ₹ 11,00,000
(B) ₹ 10,00,000
(C) ₹ 9,00,000
(D) ₹ 10,80,000
Answer:
(B) ₹ 10,00,000
In balance sheet face of debenture issued will appear. 10,000 × 100 = 10,00,000

Question 72.
Z Ltd. issued 10,000, 12% Debentures of ₹ 100 each at a discount of 10% payable in full on application by 31st May, 2019. Applications were received for 12,000 debentures. Debentures were allotted on 9th June 2019. Excess monies were refunded on the same date. Amount that will appear in balance sheet as “12% Debenture” = ?
(A) ₹ 11,00,000
(B) ₹ 10,00,000
(C) ₹ 9,00,000
(D) ₹ 10,80,000
Answer:
(B) ₹ 10,00,000
In balance sheet face of debenture issued will appear even though debentures are issued at discount. 10,000 × 100 = 10,00,000.

Question 73.
ZPA Ltd. issued 10,000,12% Debentures of ₹ 100 each at ₹ 94 on 1st January, 2010. Under the terms of issue, the debentures are redeemable at the end of 8 years from the date of the issue. Calculate the amount of discount to be written-off in each of the 8 years.
(A) ₹ 8,000
(B) ₹ 7,500
(C) ₹ 6,000
(D) ₹ 5,000
Answer:
(B) ₹ 7,500

Question 74.
HDC Ltd. issued 10,000,12% Debentures of ₹ 100 each at ₹ 94 on 1st January 2010. Under the term of issue, 1 / 5th of the debentures are annually redeemable by drawings, the first redemption occurring on 31 st December 2010. Calculate the amount of discount to be written off in 2010 & 2011.
(A) ₹ 20,000 & 16,000
(B) ₹ 16,000 & ₹ 12,000
(C) ₹ 16,000 & ₹ 12,000
(D) ₹ 12,000 & ₹ 8,000
Answer:
(A) ₹ 20,000 & 16,000

Question 75.
Z Ltd. issued 10% Debentures of ₹ 10 to a vendor having face value ₹ 2,50,000 for purchase of fixed assets of ₹ 2,00,000. No. of debentures to issued to vendors = ?
(A) 25,000 debentures
(B) 20,000 debentures
(C) 10,000 debentures
(D) 30,000 debentures
Answer:
(A) 25,000 debentures
Debenture A/c is always credited by face value whether debentures are issued at par, discount or premium.

Question 76.
X Ltd. obtained loan from IDBI of ₹ 10,00,000, giving as collateral security of ₹ 15,00,000, 14% Debenture on 1st April 2019. Which of the following accounting treatment is correct to issue debenture as collateral security
(A) No accounting entry is required
(B) Debenture Suspense A/c Dr. — 15,00,000
To 1496 Debentures A/c — 15,00,000
(C) Either (A) or (B)
(D) None of above
Answer:
(C) Either (A) or (B)

Question 77.
Following data is available from the records of NS Ltd.:
Issued capital — ₹ 20,00,000
Call, in arrear — ₹10,000
P & L A/c on 1.4.2018 ₹ 67,000
Profit for the year ₹ 1,90,610
Company wants to create debenture redemption reserve and transfer ₹ 50,000 every year. Company declared 10% dividend. Balance of surplus after effecting the above transaction = ?
(A) ₹ 6,000
(B) ₹ 6,810
(C) ₹ 68,100
(D) ₹ 8,610
Answer:
(D) ₹ 8,610
Dividend = (20,00,000 – 10,000) × 10% = 1,99,000
67,000 + 1,90,610 – 50,000 – 1,99,000 = 8,610

Question 78.
Z Ltd. issued ₹ 1,00,000 debenture at a discount of 6% on 1.1.2019 repayable in 5 equal instalments. Discount to be written off in each 5 calendar year -………….
(A) ₹ 900, ₹ 1,200, ₹ 1,200, ₹ 1,200 & ₹ 300 in 1st, 2nd, 3rd, 4th & 5th year
(B) ₹ 2,000, ₹ 1,600, ₹ 1,200, ₹ 800 & ₹ 400 in 1st, 2nd, 3rd, 4th & 5th year
(C) ₹ 400, ₹ 800,? 1,200,? 1,600 & ₹ 2,000 in 1st, 2nd, 3rd, 4th & 5th year
(D) ₹ 1,200, ₹ 1,200, ₹ 1,200, ₹ 1,200 & ₹ 1,200 in 1 st, 2nd, 3rd, 4th & 5 th year
Answer:
(B) ₹ 2,000, ₹ 1,600, ₹ 1,200, ₹ 800 & ₹ 400 in 1st, 2nd, 3rd, 4th & 5th year

Question 79.
Moon Ltd. issued 5,000 debentures of ₹ 100 each at a discount of 10%. The expenses on issue amounted to ₹ 20,000. The company wants to redeem the debentures at the rate of ₹ 1,00,000 each year commencing with the end of 5 th year. How much discount and expenses should be written off in each year.
(A) ₹ 10,000, ₹ 10,000, ₹ 10,000, ₹ 10,000, ₹ 10,000, ₹ 8,000, ₹ 6,000, ₹ 4,000, ₹ 2,000 in each year respectively
(B) ₹ 10,000, ₹ 10,000, ₹ 10,000, ₹ 10,000, ₹ 10,000, ₹ 4,000, ₹ 6,000, ₹ 6,000, ₹ 8,000 in each year respectively
(C) ₹ 2,000, ₹ 6,000, ₹ 8,000, ₹ 10,000, ₹ 10,000, ₹ 10,000, ₹ 10,000, ₹ 10,000, ₹ 10,000 in each year respectively
(D) ₹ 7,000, ₹ 7,000, ₹7,000, ₹ 7,000, ₹ 7,000, ₹ 7,000, ₹ 7,000, ₹ 7,000, ₹ 7,000 in each year respectively
Answer:
(A) ₹ 10,000, ₹ 10,000, ₹ 10,000, ₹ 10,000, ₹ 10,000, ₹ 8,000, ₹ 6,000, ₹ 4,000, ₹ 2,000 in each year respectively

Question 80.
Ganga Ltd. purchased fixed asset of ₹ 2,00,000. The consideration was paid by issue of 12% Debenture of ₹ 100 each at discount of 20%. The debenture A/c to be credited with –
(A) ₹ 1,60,000
(B) ₹ 2,40,000
(C) ₹ 2,50,000
(D) ₹ 2,60,000
Answer:
(A) ₹ 1,60,000
No. of debentures to be issued = \(\frac{2,00,000}{80}=2,500\)
Debenture A/c is always credited by face value. 2,500 × 100 = 2,50,000

Question 81.
N Ltd. purchased fixed asset of ₹ 4,00,000 out of ₹ 1,30,000 paid in cash and balance in debentures. The consideration was paid by the issue of 12% Debenture of ₹ 100 each at 10% discount.
No. of debentures to be issued = ?
(A) 3,000 debentures
(B) 4,000 debentures
(C) 4,444 debentures
(D) 30,000 debentures
Answer:
(A) 3,000 debentures
No. of debentures to be issued = \(\frac{2,70,000}{90}=3,000\)

Question 82.
F Ltd. purchased Machinery from G Company for a book value of ₹ 4,00,000. The consideration was paid by issue of 10% debentures of ₹ 100 each at a premium of 25%. The debenture account was credited with …… .
(A) ₹ 4,00,000
(B) ₹ 5,00,000
(C) ₹ 3,20,000
(D) ₹ 4,80,000
Answer:
(C) ₹ 3,20,000
No. of debentures to be issued = \(\frac{4,00,000}{125}=3,200\)
Debenture A/c is always credited by face value. 3,200 × 100 = 3,20,000

Question 83.
T Ltd. has issued 14% Debentures of ₹ 20,00,000 at a discount of 10% on April 1, 2017 and the company pays interest half-yearly on June 30, and December 31 every year. On March 31,2019, the amount shown as “interest accrued but not due” in the Balance Sheet will be -………..
(A) ₹ 70,000
(B) ₹ 2,10,000
(C) ₹ 1,40,000
(D) ₹ 2,80,000
Answer:
(A) ₹ 70,000
1.1.2019 to 31.3.2019: 20,00,000 × 14% × 3/12 = 70,000

Question 84.
On May 1, 2018, UWB Ltd. issued 7% 10,000 convertible debentures of ₹ 100 each at a premium of 20%. Interest is payable on September 30 and March 31 every year. Assuming that the interest runs from the date of issue, the total amount of interest expenditure debited to profit and loss account for the year ended March 31, 2019 will be:
(A) ₹ 70,000
(B) ₹ 58,333
(C) ₹ 84,000
(D) ₹ 64,167
Answer:
(D) ₹ 64,167
1.5.2018 to 31.3.2019: 10,00,000 × 7% × 11/12 = 64,167

Question 85.
W Ltd. issued 20,000,8% debentures of ₹ 10 each at par, which are redeemable after 5 years at a premium of 20%. The amount of loss on redemption of debentures to be written off every year will be:………..
(A) ₹ 40,000
(B) ₹ 10,000
(C) ₹ 20,000
(D) ₹ 8,000
Answer:
(D) ₹ 8,000
Premium on redemption = 20,000 × 10 × 20% = 40,000
Premium to be written off every year = 40,000/5 = 8,000

Question 86.
P Ltd. issued 5,000, 12% debentures of ₹ 100 each at a premium of 10%, which are redeemable after 10 years at a premium of 20%. The amount of loss on redemption of debentures to be written off every year = ………….
(A) ₹ 80,000
(B) ₹ 40,000
(C) ₹ 10,000
(D) ₹ 8,000
Answer:
(C) ₹ 10,000
Premium on redemption = 5,000 × 100 × 20% = 1,00,000
Premium to be written off every year = 1,00,000/10 = 10,000

Question 87.
Rama Ltd. issued 40,000,8% debentures of ₹ 10 each which are redeemable after 5 years at a premium of 20%. The amount of loss on redemption of Debentures to be written of every year will be -………….
(A) ₹ 80,000
(B) ₹ 20,000
(C) ₹ 8,000
(D) ₹ 16,000
Answer:
(A) ₹ 80,000
40,000 × 10 × 20% = 80,000

Question 88.
On 1st July, 2017 a company issued 2,500, 9% debentures of ₹ 100 each at a discount of 10%. The debentures were redeemable by five annual drawings of ₹ 50,000 on 31 st March each year. Calculate the amount of discount on debentures to be written off at the end of each year on 31st March.
(A) ₹ 6,818, ₹ 7,273, ₹ 5,455, ₹ 3,636, ₹ 1,818 for the year ended 31.3.2018 to 31.3.2022.
(B) ₹ 6,188, ₹ 7,723, ₹ 5,545, ₹ 3,366, ₹ 1,188 for the year ended 31.3.2018 to 31.3.2022.
(C) ₹ 6,881, ₹ 7,237, ₹ 5,455, ₹ 3,663, ₹ 1,881 for the year ended 31.3.2018 to 31.3.2022.
(D) None of the above is correct
Answer:
(A) ₹ 6,818, ₹ 7,273, ₹ 5,455, ₹ 3,636, ₹ 1,818 for the year ended 31.3.2018 to 31.3.2022.
Total discount = 2,500 × 10 = 25,000

Question 89.
Following journal entry appears in the books of KAKA Ltd.:

Debentures must have been issued for –
(A) Discount of 6%
(B) Discount of 4%
(C) Discount of 10%
(D) Premium of 6%
Answer:
(B) Discount of 4%

Question 90.
P Ltd. issues 8% Debenture of ₹ 100 at a discount of 5%, redeemable at the end of 5 years at par. Which of the following entry is correct.

Answer:
(B)

Question 91.
Janardhan Ltd. issued 40,00,000, 15% Debentures at 8% discount. Debentures are to be redeemed as per schedule given below:

Amount of discount to be written off in each the 5 calendar years –
(A) ₹ 80,000, ₹ 80,000, ₹ 72,000, ₹ 56,000, ₹ 32,000 in years 1 to 5.
(B) ₹ 64,000 every year
(C) ₹ 32,000, ₹ 32,000, ₹ 28,800, ₹ 25,600,₹ 12,800 in years 1 to 5.
(D) ₹ 3,20,000 in last year
Answers:
(A) ₹ 80,000, ₹ 80,000, ₹ 72,000, ₹ 56,000, ₹ 32,000 in years 1 to 5.

Question 92.
Q Ltd. issues 11% Debenture of ₹ 100 at par, redeemable at the end of 5 years at a premium of 5%. Which of the following entry is correct.

(A) 15%
(B) 10%
(C) 5%
(D) 20%
Answers:
(D) 20%

Question 93.
Following journal entry appears in the books of KAKA Ltd.:

Debentures are redeemable at a premium of
(A) 15%
(B) 10%
(C) 5%
(D) 20%
Answers:
(B) 10%

Question 94.
Sana Ltd. issues 13% Debenture of ₹ 100 at a premium of 5%, redeemable at the end of 5 years at a premium of 10%. Which of the following entry is correct

Answers:
(B)

Question 95.
Eagle Ltd. issued 15% Debenture of ₹ 100 each at a discount of 5%, but redeemable at a premium of 5% at the end of 4 years then –
(A) Loss on Issue of Debenture A/c will be credited by ₹ 5
(B) Premium on Redemption of Debenture A/c will be debited by ₹ 5
(C) Loss on Issue of Debenture A/c will be debited by ₹ 10
(D) Premium on Redemption of Debenture A/c will be debited by ₹ 10
Answers:
(C) Loss on Issue of Debenture A/c will be debited by ₹ 10

Question 96.
Fortune Ltd. issued 12% debentures of ₹ 100 each at a premium of 5% redeemable at 110% then-
(A) Premium on Redemption of Debenture A/c will be debited by ₹ 15
(B) Securities Premium A/c will be credited by ₹ 15
(C) 12% Debentures A/c will be credited ₹ 105.
(D) Premium on Redemption of Debenture A/c will be credited by ₹ 10
Answers:
(D) Premium on Redemption of Debenture A/c will be credited by ₹ 10

Question 97.
Jaju Ltd. issued ₹ 70,000,12% debentures of ₹ 100 each at a premium of 5% redeemable at 110%. If balance sheet is prepared only for this transaction then balance sheet will tally at –
(A) ₹ 73,500
(B) ₹ 70,000
(C) ₹ 77,000
(D) ₹ 80,500
Answers:
(A) ₹ 73,500

Question 98.
R Ltd. issues 12% Debenture of ₹ 100 at a discount of 5%, redeemable at the end of 5 years at a premium of 10%. Which of the following entry is correct

Answers:
(C)

Discount on Issue of ₹ 5 can be debited to “Discount on Issue of Debenture A/c” and premium payable on redemption ₹ 10 which is also loss can be debited to “Loss on Issue of Debenture A/c”.

Alternatively total loss 10 + 5 = 15 can be debited to single account “Loss on Issue of Debenture A/c”. Hence both entries are given in (A) and (B) are correct and thus Option (C) is the correct answer.

Question 99.
S Ltd. issued 10,000, 12% debentures of ₹ 100 each at a discount of 5%. These debentures are redeemable at a premium of 10% after 5 years Balance at the end of third year of “Loss on Issue of Debenture A/c” will be –
(A) ₹ 60,000
(B) ₹ 20,000
(C) ₹ 40,000
(D) ₹ 1,00,000
Answers:
(C) ₹ 40,000

Question 100.
₹ Ltd. obtained loan from IDBI of ₹ 10,00,000, giving as collateral security of ₹ 15,00,000, 14% Debenture on 1st April 2019. Which of the following entry is correct
(A) No entry is required to issue debentures.
(B) ₹ 15,00,000 will be debited to Debenture Suspense A/c and ₹ 15,00,000 will be credited to 14% Debenture A/c
(C) Both (A) and (B)
(D) ₹ 10,00,000 will be debited to Debenture Suspense A/c and ₹ 10,00,000 will be credited to 14% Debenture A/c
Answers:
(C) Both (A) and (B)

Question 101.
Z Ltd. issued 10% Debentures to public for cash at 95% having face value ₹ 10,00,000 then –
(A) Goodwill A/c will be debited by ₹ 50,000.
(B) Loss on Issue of Debentures A/c will be credited by ₹ 50,000.
(C) Discount on Debenture A/c will be debited by ₹ 50,000.
(D) 10% Debentures A/c will be credited by ₹ 9,50,000.
Answer:
(C) Discount on Debenture A/c will be debited by ₹ 50,000.

Question 102.
Q Ltd. issued 10% Debentures to a vendor having face value ₹ 2,50,000 for purchase of fixed assets of ₹ 2,00,000 then –
(A) 10% Debentures A/c will be credited by ₹ 2,50,000.
(B) Goodwill A/c will be debited by ₹ 50,000.
(C) Fixed Assets A/c will be debited by ₹ 2,00,000.
(D) All of the above
Answers:
(D) All of the above

Question 103.
₹ Ltd. borrowed ₹ 25,00,000 from a scheduled bank at an annual interest rate of 12% and deposited 14% debentures of the face value of ₹ 40,00,000 as collateral security. If balance sheet is prepared only for this transaction then balance sheet will tally at –
(A) ₹ 65,00,000
(B) ₹ 40,00,000
(C) Either (A) or (B)
(D) ₹ 15,00,000
Answers:
(A) ₹ 65,00,000

Question 104.
Mars Ltd. obtained loan of ₹ 5,00,000 on 31 st March, 2016 from a bank by issuing and securing 6,000,12% debentures of ₹ 100 each as collateral security. If balance sheet is prepared only for this transaction then balance sheet will tally at –
(A) ₹ 5,00,000
(B) ₹ 11,00,000
(C) Either (A) or (B)
(D) ₹ 6,00,000
Answers:
(C) Either (A) or (B)
If no entry passed for issue of debenture as collateral security then balance sheet will tally at ₹ 5,00,000. However, if entry is passed for issue of debenture as collateral security then balance sheet will tally at ₹ 11,00,000. Hence Option (C) is correct.

Question 105.
On 1.1.2015 ₹ Ltd. issued 10,000 fifteen years 10% debentures of ₹ 100 each. On 1.4.2020 the company gave notice to the debenture holders of its intention to redeem the debentures on 1.10.2020 either by payment in cash or by allotment of 11% preference shares of ₹ 100 each at ₹ 130 per share or 11% second debenture of ₹ 100 at ₹ 96 per debenture. Holders of 4,000 debentures accepted the offer of the preference shares. How much preference shares will be issued if debentures are redeemed at 496 premium
(A) 3,077 Preference shares
(B) 3,200 Preference shares
(C) 4,160 Preference shares
(D) 3,560 Preference shares
Answers:
(B) 3,200 Preference shares
Total amount due to debenture holder = 4,000 × 104 = 4,16,000
\(\frac{4,16,000}{130}=3,200\) = 3,200 Preference shares

Question 106.
On 1.1.2015 ₹ Ltd. issued 10,000 fifteen years 1096 debentures of ₹100 each. On 1.4.2020 the company gave notice to the debenture holders of its intention to redeem the debentures on 1.10.2020 either by payment in cash or by allotment of 1196 preference shares of ₹ 100 each at₹ 130per share or 1196 second debenture of ₹ 100 at ₹ 96 per debenture. Holders of 4,800 debentures accepted the offer of the 1196 second debentures. How much 1196 second debentures will be issued if debentures are redeemed at 9% premium
(A) 4,430 1196 Second Debentures
(B) 4,920 1196 Second Debentures
(C) 4,608 1196 Second Debentures
(D) 5,200 1196 Second Debentures
Answers:
(D) 5,200 1196 Second Debentures
Total amount due to debenture holder = 4,800 × 104 = 4,99,200
\(\frac{4,99,200}{96}=5,20011 \%\) = Second Debentures

Question 107.
Zenith Ltd. gave notice of its intention to redeem its outstanding ₹ 6,00,000, 996 debentures at 10296 and offered the holders the following options for the redemption to subscribe for:
(i) 696 Cumulative preference shares of ₹ 20 each at ₹ 22.50 per share and
(ii) 1096 Debentures of ₹ 100 each at ₹ 96.
Holders of ₹ 2,40,000 debentures accepted the proposed (i) and ₹ 3,60,000 debenture holders accepted the proposal (iii) above. How much preference shares and debentures will be issued

Answers:
(C)

No. of preference shares & 11% second debenture to be issued:
\(\frac{2,44,800}{22.5}=10,880\) Preference shares \(\frac{3,67,200}{96}\) = 3,825 10% Second Debenture

Question 108.
On 1st April, 2018, Rosy Ltd. issued 20,0, 1396 debentures of ₹ 100 each at 596 discount. Debenture holders have an option to convert their holdings in 1496 preference shares of ₹ 100 each at a premium of ₹ 25 per share. On 31st March, 2019, one year’s interest has accrued on these debentures and has remained unpaid. All debenture holders notified their intention to convert holdings in 1496 preference shares.
No. of 1496 preference shares to be issued=?
(A) 15,000 preference shares
(B) 19,000 preference shares
(C) 16,800 preference shares
(D) 15,200 preference shares
Answers:
(D) 15,200 preference shares

Question 109.
ABC Ltd. issued 1196 debenture at ₹ 95, redeemable at the end of 10 year at 9896. Which of the following entry is correct


Answers:
(B)
If debenture of ₹ 100 is redeemable after 10 years at ₹ 98 then future profit of ₹ 2 will be ignored today as per principle of conservatism.

Question 110.
On 10.4.2019, Zenith Ltd. issued 12,500, 12% debentures of ₹ 100 each at ₹ 98. Holders of these debentures have an option to convert their holdings into 14% preference shares of ₹ 100 each at a premium of ₹ 25 per share at any time within 3 years. On 31.3.2020, holders of 2,500 debentures notified their intention to exercise the option.
No. of 14% preference shares to be issued=?
(A) 1,960 preference shares
(B) 2,450 preference shares
(C) 2,000 preference shares
(D) 1,690 preference shares
Answers:
(A) 1,960 preference shares

Question 111.
On 1.1.2019, Sanjay Ltd. had outstanding in its books 1,000, 12% Debentures of ₹ 100 each. The interest is payable on 30th June & 31 st December. On 1.3.2019 the directors acquired in the open market Debentures of ₹ 10,000 @ ₹ 98.00 (cum-interest) for immediate cancellation. For this transaction Debenture Redemption A/c will be debited by –
(A) ₹ 9,600
(B) ₹ 9,800
(C) ₹ 10,000
(D) ₹ 9,700
Answers:
(A) ₹ 9,600

Question 112.
On 1.1.2019, Mumtaz Ltd. had outstanding in its books 1,000, 12% Debentures of ₹ 100 each. The interest is payable on 30th June & 31st December. On 1st Nov, 2019 the directors acquired in the open market Debentures of ₹ 5,000 @ ₹ 98.50 (ex-interest) for immediate cancellation. Cash outflow for given transaction is –
(A) ₹ 4,925
(B) ₹ 5,000
(C) ₹ 5,125
(D) ₹ 5,230
Answers:
(C) ₹ 5,125
4,925 (ex-interest price) + 200 (interest) = 5,125 (cum interest price)

Question 113.
A company purchased 200, 12% debentures of ₹ 100 each at ₹ 97 on cum interest basis on 1st July, 2019 for immediate cancellation. Interest is payable on 30th September and 31st March each year. Profit on cancellation of debentures is -……………
(A) ₹ 1,000
(B) ₹ 1,100
(C) ₹ 1,200
(D) ₹ 900
Answers:
(C) ₹ 1,200

Question 114.
ABC Ltd. had ₹ 10,00,000, 6% Debentures of ₹ 100 each as on 31st March, 2018. Company purchased in the open market following debentures for immediate cancellation:
On 1.7.2019: 1,000 Debentures @ ₹ 97 cum-interest
On 28.2.2019: 1,800 Debentures (5) ₹ 99 ex-interest.
Debenture interest due dates are 30th September and 31st March.
Profit on cancellation of debentures is –
(A) ₹ 3,600
(B) ₹ 6,300
(C) ₹ 6,500
(D) ₹ 4,900
Answers:
(B) ₹ 6,300

Ex-interest price i.e. total cost = 95,500 + 1,78,200 = 2,73,700
Profit on cancellation = Face value – Ex-intcrcst price
= 2,80,000 – 2,73,700
= 6,300

Question 115.
On 1st April, 2016 Kapil Ltd. had made an issue of 2,000, 6% debentures of ₹ 100 each. The Company during the year 2017-2018 purchased for cancellation 500 of these debentures. Company paid ₹ 95 per debenture for 400 debentures and ₹ 98 per debenture for the rest. The expenses on purchase amounted to ₹ 200. Amount to be transferred to Capital Reserve will be –
(A) ₹ 2,000
(B) ₹ 1,800
(C) ₹ 2,400
(D) ₹ 2,600
Answers:
(A) ₹ 2,000
Profit on cancellation comes to 2,200 to and after deducting expenses of ₹ 200, net amount of ₹ 2,000 will be transferred to Capital Reserve.

Question 116.
Z Ltd. had issued 1,000,6% Debentures of ₹ 100 each. Company on 1.3.2018 purchased 50 of its debentures at ₹ 96 each cum-interest. Interest payable on 30th June and 31st December. Investment in Own Debenture A/c will be debited by –
(A) ₹ 4,750
(B) ₹ 4,800
(C) ₹ 5,750
(D) ₹ 5,800
Answers:
(A) ₹ 4,750
Investment in Own Debenture A/c will be debited by ex-interest price.

Question 117.
Sinking fund investment appeared in the books of P Ltd. on 1.1.2018 at ₹ 3,00,000 which was represented by 10% ₹ 3,60,000 secured bonds of Government of India. Company sold the investments at 80%. Profit or loss on sale of investment is –
(A) ₹ 12,000 profit
(B) ₹ 60,000 profit
(C) ₹ 60,000 loss
(D) ₹ 12,000 loss
Answers:
(D) ₹ 12,000 loss

Question 118.
Following balances appeared in the books of R Ltd. on 1.4.2019:
(a) Debenture Redemption Fund ₹ 90,000 represented by investments of an equal amount (nominal value ₹ 1,12,500).
(b) 12% debentures stood at ₹ 1,35,000.
Company sold investments of ₹ 48,000 at ₹ 54,000. Debentures of ₹ 45,000 were redeemed at a premium of 20-%.
Closing balance of Debenture Redemption Fund A/c after giving effect to above transactions will be
(A) ₹ 87,000
(B) ₹ 42,000
(C) ₹ 45,000
(D) ₹ 96,000
Answers:
(B) ₹ 42,000

Question 119.
On 31.12.2018, B Ltd. showed in their accounts debenture redemption fund of ₹ 1,50,000 which was represented by ₹ 1,51,000, 5% municipal bonds purchased for ₹ 1,50,000. On 28.2.2019, the company had a balance of ₹ 28,000 at their bank and they paid into the bank account, the proceeds of sale of foregoing investments for ₹ 1,50,500. On 1st March, 2019, the debentures of the value of ₹ 1,50,000 were paid. How much amount will be transferred to General Reserve A/c out of Debenture Redemption Fund A/c after giving effect to above transactions
(A) ₹ 1,50,500
(B) ₹ 1,50,000
(C) ₹ 1,51,258
(D) ₹ 1,49,242
Answers:
(A) ₹ 1,50,500

Question 120.
Following balances appeared in the books of N Ltd.:
12% Debentures — ₹ 8,00,000
12%DebentureSinkingFund — ₹6,00,000
Sinking Fund Investments — ₹ 6,00,000
10% Govt. Bonds of — ₹ 7,20,000
Balance at bank was ₹ 3,28,000 before receipt of interest. Company sold the investments at 80% and debentures were redeemed. Closing bank balance after giving effect to above transactions will be:
(A) ₹ 9,76,000
(B) ₹ 80,000
(C) ₹ 1,04,000
(D) ₹ 1,53,000
Answers:
(A) ₹ 9,76,000

Question 121.
G Ltd. had issued 12%, ₹ 10,00,000 debentures @ ₹ 100 in the past. For the purpose of redemption, it maintains a debenture redemption fund with an annual contribution of ₹ 90,000. Balance of fund stood at ₹ 4,50,000 represented by 6%, ₹ 5,00,000 government loan. ₹ 2,00,000 government loan was sold @ ₹ 93.50 and the proceeds were utilized to purchase debentures for cancellation @ ₹ 85 each. Assume that ₹ 20,000 debentures have been redeemed out of capital and the balance with face value of ₹ 1,80,000 has been redeemed out of debenture redemption fund account. Closing balance of Debenture Redemption Fund A/c after giving effect to above transactions will be:
(A) ₹ 3,90,000
(B) ₹ 5,70,000
(C) ₹ 6,07,000
(D) ₹ 3,60,000
Answers:
(A) ₹ 3,90,000

Question 122.
Following balances stood in books X Ltd.:
3.50.0. 6% Delhi Govt. Bonds 3,56,300
4.0. 000.5% Punjab Water Loan 3,20,340
3.0. 000, 8% Goa Govt. Loan 3,08,550
80.0, 7% Gurgaon Gramin 80,210 Loan
Investments were sold as follows:
6% Delhi Govt. Bond — at par
5% Punjab Water Loan — at ₹ 91
8% Goa Govt. Loan at — ₹ 109
7% Gurgaon Gramin Loan at — ₹ 103
How much profit will be transferred to debenture redemption fund account on sale of above investments
(A) ₹ 63,400
(B) ₹ 58,000
(C) ₹ 46,300
(D) ₹ 34,600
Answers:
(B) ₹ 58,000

Question 123.
Following balances appeared in the books of Bright Ltd.:
(a) Sinking fund account ₹ 50,000
(b) Sinking fund investment account ₹ 48,000 (10% Govt, securities, nominal value ₹ 45,000)
(c) 12% Debenture account ₹ 1,00,000.
Company sold ₹ 30,000 Govt, securities at 110% and redeemed part of the debentures at a premium of 10%. Closing balance of Sinking Fund A/c will be
(A) ₹ 48,000
(B) ₹ 17,000
(C) ₹ 18,000
(D) ₹ 21,000
Answers:
(C) ₹ 18,000

Question 124.
Following balances appeared in the books of R Ltd.:
12% Debentures – ₹ 8,00,000 Sinking fund – ₹ 7,00,000
Sinking fund investment – ₹ 7,00,000 (Represented by 10% ₹ 7,50,000 secured bonds of Government of India)
Annual contribution to the sinking fund was ₹ 1,20,000 made on 31st March each year. On 31.3.2018, balance at bank was ₹ 3,50,000 before receipt of interest. Company sold the investments at 90% for redemption of debenture at a premium of 10% on above date. Amount to be transferred to general reserve after redemption of debentures will be –
(A) ₹ 5,90,000
(B) ₹ 7,90,000
(C) ₹ 8,70,000
(D) ₹ 8,20,000
Answers:
(B) ₹ 7,90,000

Question 125.
Following balances appeared in the books of JKJ Ltd.:
(a) Sinking fund account ₹ 62,500
(b) Sinking fund investment account ₹ 60,000 (10% Govt, securities, nominal value ₹ 56,250)
(c) 12% Debenture account ₹ 1,25,000.
Company sold ₹ 37,500 Govt, securities at 110% and redeemed part of the debentures at a premium of 10%. Closing balance of Sinking Fund A/c will be –
(A) ₹ 60,000
(B) ₹ 21,250
(C) ₹ 22,500
(D) ₹ 2,62,500
Answers:
(C) ₹ 22,500