Question 24 Chapter 9 of +2-Part-1 – USHA Publication 12 Class Part – 1

Question 24 Chapter 9 of +2-Part-1 - USHA Publication 12 Class Part - 1

Question 24 Chapter 9 of +2-Part-1

Free Accounting book Solution - Class 11 and Class 12

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

You can also Check out the solved question of other Chapters: –

Usha Publication – Accountancy PSEB (Class 12) – Volume I – Solution

Usha Publication – Accountancy PSEB (Class 12) – Volume II – Solution

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