1.

TOPIC: - REEDEMPTION OF DEBENTURES

Q no 1) New ways ltd issues 1000, 14% debentures of Rs 100 each. Give journal
entries and the balance sheet in each of the following cases:1)
2)
3)
4)

The debentures are issued and redeemable at par.

They are issued at a discount of 6% but redeemable at par.
They are issued at a premium of 5% but redeemable at par.
They are issued at a discount of 4% but are redeemable at a premium of 5%.

Q no 2) Journalize the following transactions:1)

2)
3)
4)

A
A
A
A

debenture
debenture
debenture
debenture

issued
issued
issued
issued

at
at
at
at

Rs
Rs
Rs
Rs

95, repayable at Rs 100.

95, repayable at rs 105.
100, repayable at Rs 105.
105, repayable at Rs 100.

Q no 3) Journalize the following transactions:1)

a)
b)
c)
d)
e)
f)
2.

Issue of 12%, 1,00,000 debentures of Rs 100 each:

Issued at par and redeemable at par.
Issued at 10% discount and redeemable at par.
Issued at 10% premium and redeemable at par.
Issued at 10% premium and redeemable at a premium of 5%.
Issued at par and redeemable at a premium of 5%.
Issued at 10% discount and redeemable at a premium of 5%.
TOPIC:- CREATION OF DEBENTURE REDEMPTION RESERVE:

Q no 4) On 1-1 2005 HMT Ltd issued 2000, 11% debentures of Rs 100each at par,
redeemable at 5% premium. Expenses on issue amounted to Rs 2000. Interest is
payable on debentures annually. It was decided to write off expenses on issue of
debentures in 2005. The debentures are redeemed on 31-12-2010. Pass journal
entries for the year 2005 and 2010.
[ Ans) DRR= Rs1, 00,000]
Q no 5) Bharat Steel issued Rs12, 00,000, 12% debentures of Rs 100 each at 10%
premium. These debentures are redeemable after 4 years. It was decided to create
debenture redemption reserve in two equal installments in 3rd and 4th year. The
debentures were redeemed at 20% premium. Also the company incurred Rs 6500 as
expenses on issue. Pass the necessary journal entries in the books of the
company.[Ans ) DRR= Rs 6,00,000]
3. TOPIC:- CREATION OF SINKING FUND:
A.CUMULATIVE SINKING FUND:Q no 6) ABC Ltd issued on Jan, 1, 1998; 1000, 12% debentures of Rs 100 each
repayable at the end of 3 years at a premium of 5%. It was decided to create a sinking

fund for the redemption of debentures. The investments are expected to earn interest
at 5% p.a. At the end of 3 years investments were sold for Rs70,000 and the
debentures were redeemed. Give journal entries; prepare debenture sinking fund a\c
and debenture sinking fund investment a\c for 3 years.[Ans) Sinking fund amount for
each year = Rs 33,307]
Q no 7)