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On July 01, 2022… (Class 12 Accountancy SQP 2023-24, Q26)

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AccountancyCBSE Class 12 · Sample paper, session 2023-24 · 6 marks · Long answer

CBSE Class 12 Accountancy sample paper 2023-24: question 26

From the official CBSE sample question paper for 2023-24, section A, question 26, for 6 marks. Try it first; the hints and our step-by-step solution are below.

Q26 · 6 marks · Long answerIssue and Redemption of Debentures

On July 01, 2022, Panther Ltd. issued 20,000, 9% Debentures of ₹100 each at 8% premium and redeemable at a premium of 15% in four equal instalments starting from the end of the third year. The balance in Securities Premium on the date of issue of debentures was ₹80,000. Interest on debentures was to be paid on March 31 every year.

Pass Journal entries for the financial year 2022-23. Also prepare Loss on Issue of Debentures account.

Source: official sample paper from cbseacademic.nic.in (PDF). See it in the full Sample paper 2023-24.

Hints

Open one hint at a time and try again before the next.

Hint 1

Premium on issue is a gain credited to Securities Premium; premium on redemption is a loss.

Hint 2

Interest runs only from 1st July to 31st March.

Hint 3

Use the whole Securities Premium balance, old and new, before touching profit.

Step-by-step solution

Each step shows the marks it earns, as an examiner would award them. Checked by an independent re-solve from the question paper.

  1. Issue (1st July, 2022): 20,000 debentures at ₹ 108 = ₹ 21,60,000; premium on redemption 15% = ₹ 3,00,000.

    ParticularsDr. (₹)Cr. (₹)
    Bank A/c Dr.21,60,000
    To Debenture Application and Allotment A/c21,60,000
    (Being application money received)
    Debenture Application and Allotment A/c Dr.21,60,000
    Loss on Issue of Debentures A/c Dr.3,00,000
    To 9% Debentures A/c20,00,000
    To Securities Premium A/c1,60,000
    To Premium on Redemption of Debentures A/c3,00,000
    (Being 20,000 9% debentures issued at 8% premium, redeemable at 15% premium)
    2 marks

  2. Interest (31st March, 2023) for 9 months: ₹ 20,00,000 × 9% × 9/12 = ₹ 1,35,000.

    ParticularsDr. (₹)Cr. (₹)
    Debenture Interest A/c Dr.1,35,000
    To Debenture holders A/c1,35,000
    (Being interest due for 9 months)
    Debenture holders A/c Dr.1,35,000
    To Bank A/c1,35,000
    (Being interest paid)
    Statement of Profit and Loss Dr.1,35,000
    To Debenture Interest A/c1,35,000
    (Being interest transferred)
    1½ marks

  3. Write-off in the year of issue: Securities Premium available = ₹ 80,000 + ₹ 1,60,000 = ₹ 2,40,000; balance ₹ 60,000 from the Statement of Profit and Loss.

    ParticularsDr. (₹)Cr. (₹)
    Securities Premium A/c Dr.2,40,000
    Statement of Profit and Loss Dr.60,000
    To Loss on Issue of Debentures A/c3,00,000
    (Being loss on issue written off)
    1 mark

  4. Loss on Issue of Debentures Account

    Particulars₹Particulars₹
    01.07.2022 To Premium on Redemption of Debentures A/c3,00,00031.03.2023 By Securities Premium A/c2,40,000
    31.03.2023 By Statement of Profit and Loss60,000
    3,00,0003,00,000
    1½ marks

Answer: Bank ₹ 21,60,000; allotment with Loss on Issue ₹ 3,00,000 to Debentures ₹ 20,00,000, Securities Premium ₹ 1,60,000, Premium on Redemption ₹ 3,00,000; interest ₹ 1,35,000; loss written off ₹ 2,40,000 from Securities Premium and ₹ 60,000 from the Statement of Profit and Loss

Where the marks are

  • Issue entries (2 marks)
  • Interest entries (1½ marks)
  • Write-off entry (1 mark)
  • Loss on Issue of Debentures account (1½ marks)

Revise the chapter

Practise this chapterBoard-style questions from Issue and Redemption of Debentures, one at a time, marked against the answer key and marking points.Back to the full paperSample paper 2023-24: every question, by section.

The question is transcribed from the official paper; figures are described in words. The solution, hints and chapter tag are ours. Spotted an error? Write tosupport@questionbuddy.in.