Question 24 Chapter 9 of +2-Part-1
24. (Issue of Debentures for consideration other than Cash/Balance Sheet) A limited company created RS. 1,00,000 debenture stock, which was issued as follows:
(a) to sundry persons for cash at 90 % Rs. 50,000 nominal.
(b) to a creditor Rs. for 20,000 capital expenditure in satisfaction of his claim 23,000 nominal.
(c) to bankers as collateral security Rs. 27,000 nominal.
The issues (a) and (b) are redeemable at the end of 5 years, at par. How the debenture stock be dealt with while preparing the balance sheet of the company?
The solution of Question 24 Chapter 9 of +2 Part-1: –
a) Rs. 50,000 debentures issued for cash to sundry persons will appear on the liabilities side of the balance sheet under the heading “Secured loans “ . Discount on issue of debentures Rs. 5,000 (10 % 50,000) will appear on assets side under the heading “ Miscellaneous Expenditures “ (not written off)
| Balance Sheet Schedule –III (part I) |
||||
| Particulars |
Note no. | Current Year ₹ | Previous Year ₹ | |
| I | 1. Equity & Liability | |||
| Share Capital | ||||
| Reserve & Surplus | ||||
| Discount on Debentures | (5,000) | |||
| 2. Non Current Liabilities | ||||
| Secured Loans | ||||
| Debentures | 50,000 | |||
| Total | 45,000 | |||
| II | Assets | |||
| 1. Non Current Assets |
||||
| 2. Current Assets | ||||
| Cash & Cash equivalent | ||||
| Cash at Bank | 45,000 | |||
| Total | 45,000 | |||
b) Debentures issued nominal Rs. 23,000 shall be shown under “Secured loans“ . Capital expenditure of Rs. 20,000 shall be shown under “Fixed Assets“ . Difference of Rs. 3,000 shall be added to discount on issue of debentures A/c. combined effect of (a) & (b) will be shown in the balance sheet as follows:-
| Balance Sheet Schedule –III (part I) |
||||
| Particulars |
Note no. | Current Year ₹ | Previous Year ₹ | |
| I | 1. Equity & Liability | |||
| Share Capital | ||||
| Reserve & Surplus | ||||
| Discount on Debentures | (8,000) | |||
| 2. Non Current Liabilities | ||||
| Secured Loans | ||||
| Debentures | 73,000 | |||
| Total | 65,000 | |||
| II | Assets | |||
| 1. Non Current Assets |
||||
| Fixed Assets | 20,000 | |||
| 2. Current Assets | ||||
| Cash & Cash equivalent | ||||
| Cash at Bank | 45,000 | |||
| Total | 65,000 | |||
c) Debentures issued Rs. 25,000 against a bank loan of Rs. 25,000 as collateral Secruity are usually shown in balance sheet by the way of note. Combined effect of (a) ,(b) & (c) is shown below :-
| Balance Sheet Schedule –III (part I) |
||||
| Particulars |
Note no. | Current Year ₹ | Previous Year ₹ | |
| I | 1. Equity & Liability | |||
| Share Capital | ||||
| Reserve & Surplus | ||||
| Discount on Debentures | 1 | (8,000) | ||
| 2. Non Current Liabilities | ||||
| Secured Loans | ||||
| Bank Loans (Secured against debentures of Rs. 27,000 as collateral Secruity) | 27,000 | |||
| Debentures (In addition debentures of Rs. 27,000 given as collateral Secruity) | 73,000 | |||
| Total | 92,000 | |||
| II | Assets | |||
| 1. Non Current Assets |
||||
| Fixed Assets | 20,000 | |||
| 2. Current Assets | ||||
| Cash & Cash equivalent | ||||
| Cash at Bank | 72,000 | |||
| Total | 92,000 | |||
Note : Debentures discount Rs. 8,000 to be written off in 5 years @ Rs. 1,600 per year.
It all about Question 24 Chapter 9 of +2-Part-1, If you have any problem please comment below.
Issue of Debentures from the point of view of Redemption
End of Solution
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Question 12 Chapter 9 of +2-Part-1 – USHA Publication 12 Class Part – 1
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Chapter No. 8 – Company Accounts (Share Capital)
Chapter No. 9 – Company Accounts (Issue of Debentures)
Chapter No. 10 – Company Accounts (Redemption of Debentures)
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Chapter No. 11 – Financial Statements of a Company
Chapter No. 12 – Financial Statement Analysis
Chapter No. 13 – Tools of Financial Statement Analysis- Comparative and Common Size
Chapter No. 14 – Accounting Ratios
Chapter No. 15 – Cash Flow Statement
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- Chapter No. 1 – Company Accounts (Share Capital)
- Chapter No. 2 – Issue of Debentures
- Chapter No. 3 – Redemption of Debentures
- Chapter No. 4 – Financial Statements of a Company (Balance Sheet Only)
- Chapter No. 5 -Financial Statement Analysis
- Chapter No. 6 – Tools/Methods of Financial Analysis
- Chapter No. 7 – Ratio Analysis
- Chapter No. 8 – Cash Flow Statement
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