Questions and Answers of Corporate Accounting

Journalise the following issues: (a). A company issued 1000, 6% debentures of ₹100 Each at par. (b). A company issued 1000, 6% debentures of ₹100 Each at 10% premium (c). A company
Goodwill Ltd. issued 1,000 6% debentures of ₹100 each. Give the journal entries in each of the following cases: (a). The debentures are issued and redeemable at par. (b). They are issued
What are the different types of debentures? Explain them in detail.
Long-term borrowing of a business: (a). Preference share capital. (b). Equity share capital.(c). Debentures. (d). None of the above.
The issue of debentures to vendor is known as issue of debentures for consideration___________.
True or False. Debentures will not be repaid on the date of redemption.
AB Ltd. issued 20,000 12% debentures of ₹100 each for public subscription, at a premium of 10% payable as to ₹20 on application, ₹50 on allotment (including premium) and the balance in one
Pass journal entries for the following transactions:(a). Issue of debentures at a discount and redeemable at par. (b). Issue of debentures at a premium and redeemable at par. (c). Issue of
State the differences between debenture and share.
Enumerate the different methods of redemption of debentures and explain them.
The term, collateral security, implies additional security given for a ___________.
True or False. Both, premium on debentures and premium on redemption of debentures, carry the same meaning.
What do you mean by Convertible Debenture? State its significance.
Zel Ltd. issued 1,000 9% debentures of ₹100 each payable, ₹20 on application and the balance on allotment. Applications were received for 1,500 debentures; out of which, applications for 900 were
Debentures are shown under the following heading in a company’s balance sheet.(a). Secured loan. (b). Unsecured loan. (c). Share capital. (d). Current liabilities.
Premium on redemption of debentures account is transferred to ___________ at the time of redemption.
True or False. Debentures can be issued at par and can be redeemed at discount.
A company purchased land & building of the book value of ₹4,50,000 from Mr. Anand. It was agreed that the purchase consideration be paid by issuing 10% debentures of ₹100 each. Pass journal
Write short notes on Own Debenture.
Narayanan & Co. Ltd. purchased assets worth ₹28,80,000. It issued debentures in satisfaction of the purchase price. Calculate how many debentures will be issued:(a). In case the debentures are
State the merits of Insurance Policy Method of redeeming debentures.
According to Companies (Amendment) Act, 1999, the premium on issue of debentures should be credited to: (a). Share Premium A/c (b). Debentures Premium A/c (c). Securities Premium
The interest paid on debentures appears on the ____________ side of the profit and loss account the company.
True or False. A company is not allowed to buy its own debentures in the open market.
Y limited has taken over the business of Krishnan, the asset and liabilities having been valued at ₹80,000 and ₹30,000 respectively. Y Co., agreed to pay ₹72,000 as the purchase price, to be
State the accounting treatment when debentures are issued as Collateral Security.
Discount on issue of debentures is shown under the following heading in a company’s balance sheet. (a). Fixed assets. (b). Non-current liabilities. (c). Investments. (d). Other
Write short notes as: (a). Debenture redemption reserve (b). Partly convertible debentures (c). Open Market buying method of redemption (d). Own Debentures acquired as Investments.
A company issued debentures of the face value of ₹1,00,000 at a discount of 6%. The debentures were repayable by annual drawings of ₹20,000. How would you deal with the discount on
Premium on issue of debentures can be used to write off the ______ on issue of debentures.
True or False. A company can write off discount on issue of debentures from the revenue profits.
MN Ltd., issued 40,000 debentures of ₹50 each at a discount of 6%. Debentures were to be redeemed at the end of five years. Pass journal entry for the issue and show the amount of discount that
Explain Ex-Interest and Cum-Interest quotation.
Interest on debenture is normally payable.(a). Every six months (b). Every three months (c). Annual payment (d). Every month
Suman Ltd. issued 40,000 debentures of ₹100 each, at a discount of 10%. The expenses of issue amounted to ₹1,00,000. The debentures were agreed to be redeemed at the rate of ₹8,00,000 each
If the purchase price for the debentures does not include interest for the expired period, the quotation is said to be _____________.
True or False. Interest on sinking fund investment is credited to general reserve.
What do you understand by Redemption Drawing by Lot?
Debenture issue is always made with a,(a). Fixed percentage of interest (b). Fixed percentage of dividend (c). Fixed percentage of dividend and interest (d). None of the above.
Z Ltd. issued 2,000 6% debentures of ₹100 each, on 1st January 2001 at a discount of 10%, redeemable at a premium of 5%. Give journal entries relating to issue of debenture and debenture interest
If the purchase price for the debentures includes interest for the expired period, the quotation is said to be _____________.
True or False. Gain on sale of sinking fund investment is to be credited to sinking fund account.
G Ltd., issued 10,00012% debentures of ₹100 each at a discount of 5% repayable after 5 years at a premium of 5%. Give journal entries both at the time of issue and redemption of debentures.
How do you deal with Discount on Issue of Debenture in accounts?
Profit on cancellation of own debentures is transferred to:(a). Capital redemption reserve (b). General reserve (c). Capital reserve (d). None of the above
Own debentures account will appear on the ___________ side of the balance sheet.
Preference shares cannot be redeemed when they are ________ paid.
P, K and R underwrote 80% of an issue of 20,000 preferene shares of ₹10 each in the ratio of 2:2:1. The ‘firm’ and ‘marked’ applications of the underwriters are as follows:Applications for
The premium on redemption of preference shares can be provided out of: (a). Securities premium A/c (b). Capital redemption reserve A/c (c). Capital reserve (d). Depreciation
A company, in a series of operations: (a). Issues at par 45,000 redeemable preference shares of ₹10 each, redeemable at a premium of 5%. (b). Redeems 15,000 of the redeemable preference
A company had decided to issue 5,000 equity shares of ₹100 Each at a premium of 10% and utilize the proceeds to redeem 50,000 12% preference shares of ₹10 each at a premium of 5%. The New issue
True or False. The premium on redemption of preference shares cannot be debited to securities premium A/c.
Capital redemption reserve can be used for issuing fully paid _________ shares.
Who are Untraceable Shareholders? State the accounting treatment for them in redemption.
The following is the balance sheet of Ramani company limited as on 31.12.96: The company resolved to redeem its preference shares at a premium of 2% out of profits. Give the necessary journal
The following is the summarised balance sheet of a company: For the purpose of redemption of preference shares, the company made a fresh issue of 4,500 equity shares of ₹10 each, at a premium
On 31st December 1993, the balance sheet of Sundaram Ltd., stood as follows:On the above date, the preference shares had to be redeemed. For this purpose, 1,000 equity shares of ₹100 each were
Sam Ltd. had as part of the share capital 20,000 preference shares of ₹100 each fully paid up. When the shares became due for redemption, the company had ₹12,00,000 in its reserve fund. The
Explain the different types of Underwriting.
Nazar Ltd., issued 10,000 equity shares of ₹100 each at par. The whole issue has been underwritten by John & Co. for a commission of 2%. The company received applications only for 5,000 shares.
When the entire issue is underwritten by only one person, his liability will be equal to: (a). Number of the shares underwritten.(b). Number of Shares underwritten minus number of shares applied
True or False. Cash alone is paid as underwriting commission.
Under partial underwriting, the company itself becomes the underwriter for the shares _________.
The Chennai motors Ltd. issued 4,00,000 equity shares of Rs.10 each. The whole issue was underwritten by Malar. Applications for 3,20,000 shares were received in all. Determine the liability of the
What is Underwriting?
What is meant by Marked Applications?
State the provisions of the Companies Act, 1956, relating to underwriting of shares and debentures.
Marked application refers to: (a). Application bearing the stamp of the underwriters (b). Applications bearing the signature of the applicants (c). Applications bearing the stamp of
True or False. The underwriters do not agree to purchase any shares in firm underwriting.
When an underwriter enters into an agreement with another person, he is known as __________.
The following underwriting of shares takes place: A—6,000 shares; B—2,500; C—1,500 shares. The issue consists of 10,000 shares. The total subscription was 7,100 shares and
Explain the term Firm Underwriting.
What are the different methods of dealing with Unmarked Applications, in relation to an Underwriting Contract?
A company issued 20,000 equity shares of ₹100 each at par and 1,000 debentures of ₹1,000 each at ₹950. The whole of the issue has been underwritten by Paul & Co. The whole of the shares are
Unmarked application refers to: (a). Application bearing the stamp of the underwriters. (b). Application received from the public without bearing the stamp of underwriters and also received
True or False. The underwriters may be an individual, partnership firm, banks financial institutions or joint stock companies.
A company issued 30,000 equity shares which were underwritten by X. The company received application for 36,000 shares. Hence, X will get his commission on the issue price of ___________ shares.
Raj Ltd., issues 20,000 equity shares of Rs. 10 each at par. The issue was underwritten by Kala & Co. for maximum commission permitted by law. The public applied for and received 16,000 shares.
What do you mean by Unmarked Applications?
How do you calculate Underwriters’ Liability in Complete Underwriting and Partial Underwriting?
The remuneration of the underwriter is calculated on: (a). The issue price of the shares underwritten (b). The face value of shares actually purchased (c). The marked
True or False. The application received directly by the company which bears the stamp of the underwriters are called ‘marked application’
When _________are allotted to the underwriters, the underwriters A/c is debited.
Excel Ltd. issued 4,000 10% debentures of Rs.100 each at a discount of 6%. The whole of the issue was underwritten by M/s Mani & Co. for maximum commission permitted by law. The public applied
What do you mean by Gross Liability Ratio?
Write a note on Underwriting Commission.
Complete underwriting means: (a). The whole of the issue of shares or debentures is not underwritten (b). The whole of the issue of shares or debentures is underwritten (c). Only a
True or False. The net liability of underwriters, under complete underwriting, can be ascertained by deducting total applications received from shares or debentures offered.
When commission is payable to the underwriters, underwriters’ A/c is __________.
Gopu underwrites the new issue of 4,000 Preference shares of Rs.100 each at a premium of 10% of K.R. Ltd. The underwriting commission was payable as per the maximum rate allowed by law. The Public
Arun Ltd. issued 1,00,000 equity shares. The whole of the issue was underwritten as follows: X: 40%; Y: 40%; Z: 20% Applications for 80,000 shares were received in all; out of which,
If a part of the issue of shares or debenture is underwritten, it is termed as: (a). Partial underwriting.(b). Firm underwriting (c). Complete underwriting. (d). None of the above.
From the following details, compute the Net Liability of Underwriters: Total Number of shares offered to the Public: 10,000 Number of Shares Underwritten by X-5,000; Y-3,000; Z-2,000 Marked
True or False. Unmarked application can be distributed among the underwriters in the ratio of gross liability.
Bank A/c is debited when the _________ due from the underwriters on the shares taken up by them is received.
Manu Ltd., issued 2,00,000 equity shares of which only 60% was underwritten by Gomathi. Applications for 1,80,000 shares were received in all out of which application for 1,04,000 were marked.
In firm underwriting, the underwriter: (a). Does not agree to buy a definite number of shares in addition to unsubscribed shares (b). Agrees to buy a definite number of shares in addition
Swetha Ltd. issued 40,000 equity shares of ₹100 each. Of the issue, 80% was underwritten by Prem. Applications for 28,000 shares were received in all by the company. Determine the liability of Prem.
True or False. Marked applications are also known as direct application.
The underwriting commission on shares should not exceed _____ per cent as per SEBI guidelines.

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