The Company issued debentures of the face value of Rs. 1,00,000 at a discount of 6% on 1st January, 2004. These debentures are redeemable by annual drawings of Rs. 20,000 made on 31st Dec. each year. The Directors decided to write off discount based on the debentures outstanding each year. Discount to be written off in the fifth year will be
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Solution
On 1st Jan. 2010, a Limited Co. issued 14% Rs. 1,00,000 debentures at a discount of 6% repayable at the end of 5 years. Amount of discount to be written off every year will be
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Solution
The amount of debenture discount can be written off in two ways :
1. All debentures are to be redeemed after a fixed period. When the debentures are to be redeemed after a fixed period, the amount of discount will be distributed equally within the number of years spreaded between the issue of debentures and their redemption. The amount of discount on issue of debentures to be written off each year is calculated as Amount of discount to be written off annually = Total amount of Discount/Number of years2. Debentures are redeemed in instalments
Debentures may also be redeemed in instalments but over a fixed period. In that case the amount of debenture discount will be written off each year in proportion to the amount of debentures redeemed. Here On 1st Jan. 2010, a Limited Co. issued 14% Rs. 1,00,000 debentures at a discount of 6% repayable at the end of 5 years.Total discount = 6% of 1,00,000 = Rs. 6,000
Here Amount of discount to be written off annually
= Total amount of Discount/Number of years
= 6,000/5 = Rs. 1,200
A Company issued 2,000, 12% debentures of Rs. 100 each at par but redeemable at 5% premium. Loss on issue of debentures will be
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Solution
A company may issue debentures with the stipulation that the repayment of the debentures on maturity will be made at premium.
The amount of the premium payable is debited to Loss on Issue of Debentures A/c at the time of issue of debentures. This amount will also be written off in the same manner as is done in case of writing off Discount on Issue of Debentures.
So here the Loss on issue of debentures will be = 5% of 2,00,000 = Rs. 10,000
The Promising Co. Ltd. took over assets of Rs. 3,50,000 and liabilities of Rs. 30,000 of X Ltd. for a purchase consideration of Rs. 3,30,000. The Promising Co. Ltd. paid the purchase consideration by issuing 12% debentures of Rs. 100 each at 10% premium. Number of Debentures issued will be
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Solution
Total value of business purchased = Rs. 3,30,000
Amount to be paid by issue of 12% debentures = 3,30,000
Value per debenture at premium = Rs. 110
Thus number of debentures to be issued = 3,30,000/110 = 3,000 debentures
B Ltd. forfeited 500 shares of Rs. 10 each fully called up for non payment of first call of Rs. 2 per share. All these shares were reissued as fully paid for Rs. 8 per share. Amount transferred to capital reserve will be
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Solution
When the shares forfeited are reissued at discount, Bank account is debited by the amount received and Share capital account is credited by the paid up amount. The amount of discount allowed is debited to Share Forfeited Account. This is for adjusting the amount of discount so allowed from the amount forfeited at the time of forfeiture.
Now the amount of discount allowed on reissue of shares at the most can be equal to the forfeited amount on such shares. In that case the share forfeited account after reissue will show a zero balance. But in case, this amount of discount is less than the amount forfeited, the remaining forfeited amount will be profit for the company. This profit is a capital gain to the company and is transferred to Capital Reserve account.
In the above question discount on shares reissued = number of shares reissued × discount allowed per share = 500 × 2 = Rs. 1,000.
Amount available for the reissued shares in shares forfeiture account = number of shares reissued × amount forfeited per share = 500 × (8) = Rs. 4,000
The surplus amount to be transferred to capital reserve account = 4,000 – 1,000 = Rs. 3,000.
X Ltd. forfeited 100 shares of Rs. 10 each issued at par to Ravi on which he had paid Rs. 2.50 per share on application and Rs. 2.50 per share on allotment. But on which he had
not paid Rs. 3 on first call, Share capital in case of forfeiture will be debited by
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Solution
Share capital in case of forfeiture will be debited by Rs. 100 × 8 (2.50 + 2.50 + 3) = Rs. 800.
Chandra Ltd. issued 15,000 equity shares of Rs. 100 each at par. Payments were made as – on application Rs. 30; on allotment Rs. 35 and Rs. 35 on first and final call. Applications for 14,000 shares were received and all were accepted. All the money was duly received except the first and final call on 200 shares cash book balance will be
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Solution
Amount received on application = 14,000 × 30 = Rs. 4,20,000
Amount received on allotment = 14,000 × 35 = Rs. 4,90,000
Amount received on first and final call = 13,800 × 35 = Rs. 4,83,000
Cash book balance will be = 4,20,000 + 4,90,000 + 4,83,000 = Rs. 1,39,3000
Mr. A receives a bill from B for Rs. 30,000 on 01.01.2010 for 3 months. On 04.02.2010. Mr. A got the bill discounted at 12%. The amount of discount will be
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Solution
Bills of exchange is a financial service, where the Bank purchases drawn bills, from the domestic trade transactions, confirmed in particular with an invoice - with right of recourse to you - and credits you with the amount of the bill of exchange less discount interest and additional costs related to the bill, accrued in advance from the discount date to the bill payment term.
Here amount of the bill = 30,000
The bill was accepted by B on 1st January but was discounted on 4th February so,
Amount to be paid to bank on discounting at 12%pa = 30,000 × 12/100 × 2/12 = Rs. 600
Ramesh, an employee gets a salary of Rs. 10,000, he withdrew goods of Rs. 7,000 (cost price Rs. 6,000) for personal use and got salary Rs. 6,000. The excess payment will be
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Solution
Ramesh, an employee gets a salary of Rs. 10,000.The goods withdrawn by Ramesh for personal use will be debited to his salary Rs 6000at cost and the when he received Rs. 6,000 again in cash for salary he got Rs (6,000 + 6,000 – 10,000) = 2,000 excess salary so it should be debited to salaries paid in advance as per the matching principle.
A’s acceptance to B for Rs. 2,500 discharged by a cash payment of Rs. 1000 and a new bill for the balance plus Rs. 50 for interest. The amount of the new bill will be
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Solution
Sometimes, acceptor of a bill finds himself unable to meet his acceptance on the due date. So he may approach the drawer of the bill before the maturity date arrives, to cancel the old bill and draw a new bill with extended date. The acceptor in this case will of course have to pay interest for the extended period. When a bill of exchange is dishonored, the holder can get such fact noted on the bill by a notary public.The advantages of noting is that the evidence of dishonored is secured. The noting is done by recording the fact of dishonored, the date of dishonor, the reason of dishonor, if any. For doing all this the notary
public charges his fees which is called noting charges.
In case the bill is renewed the interest will not be charged on the noting charges which will be treated separately and will not be clubbed with the amount of the bill.
Here Total amount of the A’s acceptance = 2,500
Amount paid in cash = 1,000
Amount of the renewed bill = amount remaining + interest = 1,500 + 50 = Rs. 1,550