Chapter 6: Issue of Debentures — Online MCQ Test
ACCOUNTANCY · CLASS 12 SECOND PUC · Karnataka State Board
Practice Chapter 6: Issue of Debentures with a free chapter-wise online MCQ test.
This chapter covers: Debentures Corporate Debt Issue of Debentures Discount Premium Redemption Collateral Security Debenture Redemption Journal Entries Long Term Borrowings Consideration Other Than Cas....
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Chapter 6: Issue of Debentures — Important Questions & Answers
A debenture is generally regarded as a:
- A. Certificate of ownership in a company
- B. Certificate of debt issued by a company
- C. Part of share capital
- D. Reserve created out of profit
Answer: B. Certificate of debt issued by a company
A debenture is an acknowledgement of debt by a company. It represents borrowed funds and not ownership capital.
A debenture is an acknowledgement of debt by a company. It represents borrowed funds and not ownership capital.
In the Balance Sheet of a company, debentures are normally shown under:
- A. Shareholders' Funds
- B. Non-current Liabilities
- C. Current Assets
- D. Reserves and Surplus
Answer: B. Non-current Liabilities
Debentures are long-term borrowings of a company. Therefore, they are generally shown under Non-current Liabilities.
Debentures are long-term borrowings of a company. Therefore, they are generally shown under Non-current Liabilities.
A secured debenture is one which is:
- A. Issued free of interest
- B. Issued only to directors
- C. Secured by a charge on assets of the company
- D. Always issued at discount
Answer: C. Secured by a charge on assets of the company
Secured debentures carry a charge on the assets of the company. This provides security to debentureholders.
Secured debentures carry a charge on the assets of the company. This provides security to debentureholders.
Premium received on issue of debentures is credited to:
- A. Statement of Profit and Loss
- B. Debenture Application Account
- C. Securities Premium Reserve Account
- D. Discount on Issue of Debentures Account
Answer: C. Securities Premium Reserve Account
Premium on issue of debentures is a capital receipt. It is credited to Securities Premium Reserve Account.
Premium on issue of debentures is a capital receipt. It is credited to Securities Premium Reserve Account.
A company issued 1,000 debentures of ₹100 each at par. What amount will be credited to Debentures Account?
- A. ₹90,000
- B. ₹1,00,000
- C. ₹1,10,000
- D. ₹10,000
Answer: B. ₹1,00,000
Debentures Account is credited with the nominal value of debentures issued. Here, 1,000 × ₹100 = ₹1,00,000.
Debentures Account is credited with the nominal value of debentures issued. Here, 1,000 × ₹100 = ₹1,00,000.
A company issued 500 debentures of ₹100 each at a premium of 10%. The amount credited to Securities Premium Reserve Account will be:
- A. ₹5,000
- B. ₹50,000
- C. ₹55,000
- D. ₹45,000
Answer: A. ₹5,000
Premium is 10% of ₹100 = ₹10 per debenture. For 500 debentures, securities premium = 500 × ₹10 = ₹5,000.
Premium is 10% of ₹100 = ₹10 per debenture. For 500 debentures, securities premium = 500 × ₹10 = ₹5,000.
A company issued 1,000 debentures of ₹100 each at 10% discount, redeemable at 10% premium. What is the total amount debited to Loss on Issue of Debentures Account?
- A. ₹10,000
- B. ₹20,000
- C. ₹90,000
- D. ₹1,10,000
Answer: B. ₹20,000
Loss includes discount on issue of ₹10,000 and premium on redemption of ₹10,000. Total loss = ₹20,000.
Loss includes discount on issue of ₹10,000 and premium on redemption of ₹10,000. Total loss = ₹20,000.
A company purchased assets of ₹8,00,000 and took over liabilities of ₹2,00,000. Purchase consideration was settled by issuing debentures of ₹100 each at 10% discount. How many debentures were issued if purchase consideration was ₹5,40,000?
- A. 5,400 debentures
- B. 6,000 debentures
- C. 4,860 debentures
- D. 8,000 debentures
Answer: B. 6,000 debentures
Issue price per debenture = ₹100 - 10% = ₹90. Number of debentures = ₹5,40,000 ÷ ₹90 = 6,000.
Issue price per debenture = ₹100 - 10% = ₹90. Number of debentures = ₹5,40,000 ÷ ₹90 = 6,000.
A company purchased a business for ₹7,20,000 and discharged the purchase consideration by issuing debentures of ₹100 each at 20% premium. How many debentures were issued?
- A. 6,000 debentures
- B. 7,200 debentures
- C. 8,640 debentures
- D. 5,760 debentures
Answer: A. 6,000 debentures
Issue price per debenture = ₹100 + 20% = ₹120. Number of debentures = ₹7,20,000 ÷ ₹120 = 6,000.
Issue price per debenture = ₹100 + 20% = ₹120. Number of debentures = ₹7,20,000 ÷ ₹120 = 6,000.
A company issued 1,500 debentures of ₹100 each at 5% premium, redeemable at 10% premium. Which combination is correct?
- A. Securities Premium Reserve ₹7,500 and Premium on Redemption ₹15,000
- B. Securities Premium Reserve ₹15,000 and Premium on Redemption ₹7,500
- C. Loss on Issue of Debentures ₹7,500 only
- D. Bank received ₹1,35,000 and Debentures credited ₹1,50,000
Answer: A. Securities Premium Reserve ₹7,500 and Premium on Redemption ₹15,000
Issue premium = 1,500 × ₹5 = ₹7,500, credited to Securities Premium Reserve. Redemption premium = 1,500 × ₹10 = ₹15,000, credited to Premium on Redemption of Debentures.
Issue premium = 1,500 × ₹5 = ₹7,500, credited to Securities Premium Reserve. Redemption premium = 1,500 × ₹10 = ₹15,000, credited to Premium on Redemption of Debentures.