Term Test

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Questions:

Generic 3

10 x 3 = 30

Gateway Ltd sold its car at a profit of Rs 15,000. How will it be shown in the statement of profit and loss?

Pass necessary journal entries for the following transactions :
(i) The company had a balance of Rs. 6,00,000, 8% Debentures. Out of these, 25% debentures were redeemed by draw of lots at a premium of 25%.
(ii) Paid half yearly interest on Rs. 1,80,000, 12% Debentures.

Under which major sub-headings the following items will be placed in the Balance Sheet of a company as per Schedule III Part I of the Companies Act 2013:
(i)Long term Borrowings
(ii)Trade Payables
(iii)Provision or Tax
(iv)Securities Premium Reserve
(v)Patents
(vi)Accrued Incomes

Under which major sub-headings the following items will be placed in the Balance Sheet of a company as per Schedule III Part I of the Companies Act 2013:
(i)Bonds
(ii)Capital Redemption Reserve
(iii)Short-term Provisions
(iv)Balance of the statement of profit and Loss
(v)Provision for Warranties
(vi)Brand/Trade Marks

On 01.11.2011, a Public Limited Company issued 5,000, 10% Debentures of Rs.100 each at par which were repyable at a premium of 10% on 31.03.2015. On the date of maturity, company decided to redeem the above mentioned 10% Debentures as per the terms of issue, out of profits. The Profit and Loss Statement shows a surplus of Rs.4,00,000 on this date. The offer was accepted by all the Debentureholders and all the Debentures were redeemed. Pass the necessary journal entries in the books of the Company only for the redemption of Debentures, if the Company follows Section 71 of the Companies Act, 2013.

Alfa Ltd. issued 10,000,9% debentures of Rs.100 each. Pass the necessary journal entries for issuing of debentures in the following cases:(i) When debentures are issued at par and redeemable at par.
(ii) When the debentures are issued at par and redeemable at premium of 10%.
(iii) When debentures are issued at a premium of 25% to the vendors for the purchase of machinery worth Rs.12,50,000.
(iv) When debentures are issued at a premium of Rs.250 each and are redeemed at par.

Give journal entries in each of the following cases if the face value of a debenture is Rs.100.
(i) A debenture issued at Rs.110 repayable at Rs.100
(ii) A debenture issued at Rs.100 repayable at Rs.105
(iii) A debenture issued at Rs.105 repayable at Rs.105

Deepak Ltd. Purchased furniture Rs.2,20,000 from M/s Furniture Mart. 50% of the amount was paid to Furniture Mart by accepting a bill of exchange and for the balance the company issued 9% debentures of Rs.100 each at a premium of 10% in favour of Furniture Mart.
Pass necessary journal entries in the books of Deepak Ltd. for the above transactions.

Y Ltd. Purchased machinery Rs.55,000 from Z Ltd. 10% was paid by Y Ltd. by accepting a bill of exchange in favour of Z Ltd. and the balance was paid by issue of 9% debentures of Rs.100 each at par, redeemable after five years. Pass necessary journal entries in the books of Y Ltd.

10.

A Ltd. purchased the business of B Ltd. for Rs.90,000. Payment was made by issue of 12% debentures of Rs.10 each. What journal entries will be made when
(i) debentures are issued at 20% premium?
(ii) debentures are issued at 10% discount?

Generic 8

2 x 8 = 16

11.

Akshat Ltd issued 5,000, 9% debentures on Rs.100 each at par for cash and also raised a loan of Rs.80,000 from America Bank, for which the company placed with the bank Rs.1,00,000, 9% debentures as collateral security. As per the terms, the bank is obliged and bound to immediately release the debentures, as soon as the loan is repaid. How will y u show the debentures in the balance sheet of the company assuming that the company has recorded the issue of debentures as collateral in the books? Identify the value which according to you motivated the bank, to insist the company for issuing debentures as collateral security against the loan.

12.

Compute cost of materials consumed from the given information.

Particulars	Amt(Rs)
Opening Inventory: Raw Materials	11,00,000
Work-in-progress	2,00,000
Stock-in-trade	3,00,000
Finished Goods	5,00,000
Raw Materials Purchased	45,00,000
Closing Inventory: Raw Materials	9,00,000
Work-in-progress	1,00,000
Stock-in-trade	2,00,000
Finished Goods	3,00,000

Generic 6

3 x 6 = 18

13.

OLF Ltd has credit balance of Rs 2,52,000 in surplus, i.e. balance in statement of profit and loss. Instead of declaring dividend, it is resolved to utilise the profits to repay its Rs 2,40,000 debentures now redeemable at a premium of 5%.
Pass necessary journal entries in the books of the company.

14.

On 1st April. 2015 Virat Ltd issued 4,000,9% debentures of Rs 100 each at a premium of 5%. These debentures were redeemable at par after three years by conversion into equity shares of Rs 100 each to be issued at a premium of Rs 25 per share. Record the necessary journal entries in the books of the company for the issue and redemption of debentures.

15.

On 1st January, 2015, ABC Ltd issued 10,000, 10% debentures of Rs 100 each at par. These debentures were redeemed at 5% premium at the end of fifth year out of profit. Give necessary journal entries for recording the above transactions.

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Answers Key:

Generic 3

10 x 3 = 30

The profit on sale of car will be shown as 'other income'.

(i) Dr. 8% Debentures A/c Rs. 1,50,000 and Premium on Redemption of Debentures A/c Rs. 37,500, Cr. Debentureholders A/c Rs. 1,87,500; Dr. Debentureholders A/c, Cr. Bank A/c by Rs. 1,87,500
(ii) Dr. Interest on Debentures A/c; Cr. Debentureholders A/c by Rs. 10,800; Dr. Debentureholders A/c; Cr. Bank A/c by Rs. 10,800.
[Hint : Case (i) As debentures issued are not given in the question, it is assumed that DRR has already been created.]

(i)Non-current Liabilities
(ii)Current Liabilities
(iii)Current Liabilities
(iv)Shareholders' fund
(v)Non-current Assets
(vi)Current Assets

(i)Non-current Liabilities-Long-term Borrowings
(ii)Shareholders' Fund-Reserves and Surplus
(iii)Current Liabilities-Short-term Provisions
(iv)Shareholders' Funds-Reserves and Surplus
(v)Non-Current Liabilities-Long-term provisions Non-current Assets-Fixed Assets(Intangible)

(i) 30.04.2014 - Dr Debenture Redemption Investment A/c, Cr. Bank A/c by Rs. 75,000, i.e., 15% of Rs. 5,00,000.
(ii) 31.03.2015 - Dr. Bank A/c, Cr. Debenture Redemption Investment A/c by Rs. 75,000
(iii) Dr. Surplus Statement of Profit and Loss; Cr. Debenture Redemption Reserve by Rs. 1,25,000
(iv) Dr. 10% Debentures A/c Rs. 5,00,000 and Premium on Redemption of Depentures A/c Rs. 50,000; Cr. Debentureholders A/c Rs. 5,50,000
(v) Dr. Debentureholders A/c; Cr. Bank A/c by Rs. 5,50,000 (vi) Dr. Debenture Redemption Reserve A/c; Cr. General Reserve A/c by Rs. 1,25,000.

(i) Dr.Bank A/c; Cr.Debenture Application and Allotment A/c by Rs.10,00,000; Dr.Debenture Application and Allotment A/c; Cr.9% Debentures A/c by Rs.10,00,000.
(ii) Dr.Bank A/c; Cr.Debenture Application and Allotment A/c by Rs.10,00,000; Dr.Debenture Application and Allotment A/c Rs.10,00,000 and Loss on Issue of Debentures A/c Rs.1,00,000; Cr.9% Debentures A/c by Rs.10,00,000 and Premium on Redemption of Debentures A/c Rs.1,00,000.
(iii) Dr.Machinery A/c; Cr. Vendor A/c by Rs.12,50,000; Dr.Vendor A/c Rs.12,50,000; Cr.9% Debentures A/c Rs.10,00,000 and Sacurities Premium Reserve Rs.2,50,000.
(iv)Dr.Bank A/c; Cr.Debenture Application and Allotment A/c by Rs.35,00,000; Dr.Debenture Application and Allotment A/c Rs.35,00,000; Cr.9% Debentures A/c by Rs.10,00,000 and Securities Premium Reserve A/c Rs.25,00,000.

(i) Dr.Bank, Cr.Debenture Application and Allotment A/c by Rs.110; Dr.Debenture Application and Allotment A/c Rs.110, Cr.Debenture Rs.100 and Securties Premium reserve Rs.10.
(ii) Dr.Bank, Cr.Debenture Application and Allotment by Rs.100, Dr.Debenture Application and Allotment Rs.100 and Loss on Issue of Debenture Rs.5; Cr.Debenture Rs.100 and Premium on Redemption of Debenture Rs.5.
(iii) Dr.Bank, Cr.Debenture Application and Allotment A/c by Rs.105; Dr.Debenture Application and Allotment A/c Rs.105 and Loss on Issue of Debentures Rs.5, Cr.debenture Rs.100, Securities Premium Reserve Rs.5 and premium on Redemption of Debenture Rs.5.

(i) Dr.Furniture, Cr.M/s Furniture Mart by Rs.2,20,000.
(ii) Dr.M/s Furniture Mart, Cr.B/P A/c by Rs.1,10,000
(iii) Dr.M/s Furniture Mart Rs.1,10,000; Cr.9% Debentures Rs.1,00,000 and Securities Premium Reserve Rs.10,000. (No. of Debentures issued 1,000, i.e., Rs.\(1,10,000\div 110\) ).

(i) Dr.Machinery A/c, Cr.Z Ltd. by Rs.55,000.
(ii) Dr.Z Ltd., Cr.Bills payable A/c by Rs.5,500.
(iii) Dr.Z Ltd., Cr.9% Debentures by Rs.49,500 (No of Debentures issued 495, i.e., Rs.\(49,000\div 100\) ).

10.

Dr.Sundry Assets A/c, Cr.B Ltd. by Rs.90,000,
(i) Dr.B Ltd., Cr.12% Debentures A/c Rs.75,000 and Securities Premium Reserve A/c Rs.15,000
(ii) Dr.B Ltd. Rs.90,000 and Discount on Issue of Debentures A/c Rs.10,000; Cr.12% Debentures A/c Rs.1,00,000.

Generic 8

2 x 8 = 16

11.

Balance Sheet
as at...

Particulars	Note No.	Amt(Rs)
I. Equity and liabilities
1.Non-current Liabilities
Long-term Borrowings	1	5,80,000
		5,80,000

Particulars		Amt(Rs)
1. Long-termBorrowings
Loan from Bank		80,000
Debentures
5,000, 9% Debentures of Rs.100 each		5,00,000
1,000, 9% Debentures of Rs.100 each Issued as Collateral Security	1,00,000
(-)Debenture Suspense	(1,00,000)	-
		5,80,000

12.

Cost of materials consumed
=Opening inventory of raw materials+Purchase of raw materials-Closing inventory of raw materials
=Rs 11,00,000+Rs 45,00,000-Rs 9,00,000
=Rs 47,00,000

Generic 6

3 x 6 = 18

13.

DRR should be created for Rs 2,40,000 because redemption is out of profit. Investment in specified securities = Rs 36,000.

14.

Number of Shares Issued 3,200

15.

Amount transferred to DRR = Rs 2,50,000