✓ Board-verified
Accountancy · 2022 · 3 marks
Issue and Redemption of DebenturesIssue of Debentures for Consideration other than Cash3 marksshort answer
CBSE 2022 · Region 2 · Set 2 · Q6
Khandelwal Ltd. took over assets of Sharma Ltd. of ₹ 25,00,000 and liabilities amounting to ₹ 7,80,000 for a purchase consideration of ₹ 27,00,000.…
Khandelwal Ltd. took over assets of Sharma Ltd. of ₹ $\displaystyle 25,00,000$ and liabilities amounting to ₹ $\displaystyle 7,80,000$ for a purchase consideration of ₹ $\displaystyle 27,00$,000. The payment to Sharma Ltd. was made by issuing $\displaystyle 10$% Debentures of ₹ $\displaystyle 100$ each at a discount of $\displaystyle 10$%. Pass the necessary journal entries for the above transactions in the books of Khandelwal Ltd.
Explain the meaning of issue of debentures as collateral security with the help of an example.
Marking-scheme solution
Khandelwal Ltd.
Journal
L.F Debit Credit
Date Particulars
Amount Amount
(₹) (₹)
Sundry assets A/c Dr. $\displaystyle 25,00,000$
Goodwill A/c Dr. $\displaystyle 9,80,000$
To Sundry liabilities A/c $\displaystyle 7,80,000$
To Sharma Ltd. $\displaystyle 27,00,000$
(Acquired Assets and Liabilities
of Sharma Ltd.)
Sharma Ltd. ($\displaystyle 30,000$×$\displaystyle 90$) Dr. $\displaystyle 27,00,000$
Loss /Discount on issue of
$\displaystyle 3,00,000$
Debentures A/c ($\displaystyle 30,000$×$\displaystyle 10$) Dr.
To $\displaystyle 10$% Debentures A/c $\displaystyle 30,00,000$
(Issued $\displaystyle 10$% debentures in favour of
Sharma Ltd. and recorded loss/
discount on issue of debentures)
$\displaystyle 27,00,000$
Number of debentures to be issued =
$\displaystyle 100$ − $\displaystyle 10$
$\displaystyle 27,00,000$
=
$\displaystyle 90$
= $\displaystyle 30,000$ debentures
Q. (b) Explain the meaning of issue of debentures as collateral security…
Ans.
Collateral security may be defined as a secondary security besides the primary
security when a company obtains loan from a bank or any other financial
institution. Collateral security is to be realized only when the loan amount is not
fully recovered from the sale proceeds of the primary security.
The company may issue its own debentures to the lenders in addition to some
other assets already pledged. Such issue of debentures is known as ‘debentures
issued as collateral security’.
Example : Ananda Ltd. took a loan of ₹ $\displaystyle 50$ lakhs from Sind Bank and issued
$\displaystyle 9$% debenture of ₹ $\displaystyle 60$ lakhs (₹ $\displaystyle 100$ each) as a collateral security.
Or any other correct example.
All Issue and Redemption of Debentures questions2022 question paperPractice Issue and Redemption of Debentures →
More from Issue and Redemption of Debentures
- Maharaja Ltd. took over assets of ₹ 15,00,000 and liabilities of ₹ 2,00,000 of Dolphin Ltd. for an agreed purchase consideration of ₹ 12,60,000. It…2024
- Debentures which can be transferred by way of delivery and the company does not keep any record of the debentureholders are called:2025
- Sinco Ltd. purchased assets of the book value of ₹ 1,98,000 from Dixon Ltd. It was agreed that the purchase consideration be paid by issuing 10%…2023
- On 1st April, 2022, Mega Ltd. issued 30,000, 10% Debentures of ₹ 100 each at a discount of 10%. The total amount of interest due on debentures for…2024
- Satnam Ltd. purchased Building worth ₹ 5,00,000, Plant worth ₹ 4,60,000 and Furniture worth ₹ 2,20,000 from Gurnam Ltd. for a purchase consideration…2022
- Shivalik Ltd. issued 7% debentures of 2 100 each at a discount of 5% on 1st April, 2023. Discount on issue of debentures, ₹ 1,00,000 was completely…2025
- The debentures which do not carry a specific rate of interest are called:2024
- Debentures in respect of which all details including names, addresses and particulars of holding of the debenture holders are entered in a register…2025
CBSE Class 12 Accountancy past-paper question from the 2022 board exam, with the answer as CBSE’s own marking scheme gives it. Where our answers come from.