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Answer the… (Class 12 Accountancy SQP 2024-25, Q23b)

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AccountancyCBSE Class 12 · Sample paper, session 2024-25 · 6 marks · Long answer

CBSE Class 12 Accountancy sample paper 2024-25: question 23(b)

From the official CBSE sample question paper for 2024-25, section A, question 23(b), for 6 marks. Try it first; the hints and our step-by-step solution are below.

Q23(b) · 6 marks · Long answerIssue and Redemption of Debentures

Answer the following.

  1. a)

    Pass the necessary journal entries for 'Issue of Debenture' for the following:
    i. Arman Ltd. issued 750, 12% Debentures of ₹100 each at a discount of 10% redeemable at a premium of 5%.
    ii. Sohan Ltd. issued 800, 9% Debentures of ₹100 each at a premium of 20 per debenture redeemable at a premium of ₹10 per Debenture.

    4 marks
  2. b)

    X Ltd. obtained a loan of ₹4,00,000 from IDBI Bank. The company issued 5,000 9%. Debentures of ₹100 each as a collateral security for the same. Show how these items will be presented in the Balance Sheet of the company.

    2 marks

Source: official sample paper from cbseacademic.nic.in (PDF). See it in the full Sample paper 2024-25.

Hints

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

Hint 1

Issue price = face value − discount or + premium.

Hint 2

Premium payable on redemption is always a loss on issue.

Hint 3

Collateral debentures are not recorded as a liability; they are mentioned in the note on the loan.

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. (a)(i) Arman Ltd.: issue price ₹ 90; loss on issue = discount ₹ 7,500 + premium on redemption ₹ 3,750 = ₹ 11,250.

    ParticularsDr. (₹)Cr. (₹)
    Bank A/c Dr.67,500
    To Debenture Application and Allotment A/c67,500
    (Being application money received)
    Debenture Application and Allotment A/c Dr.67,500
    Loss on Issue of Debentures A/c Dr.11,250
    To 12% Debentures A/c75,000
    To Premium on Redemption of Debentures A/c3,750
    (Being 750 debentures issued at 10% discount, redeemable at 5% premium)
    2 marks

  2. (a)(ii) Sohan Ltd.: issue price ₹ 120 (₹ 96,000); premium on issue ₹ 16,000; premium on redemption ₹ 8,000 is a loss on issue.

    ParticularsDr. (₹)Cr. (₹)
    Bank A/c Dr.96,000
    To Debenture Application and Allotment A/c96,000
    (Being application money received)
    Debenture Application and Allotment A/c Dr.96,000
    Loss on Issue of Debentures A/c Dr.8,000
    To 9% Debentures A/c80,000
    To Securities Premium A/c16,000
    To Premium on Redemption of Debentures A/c8,000
    (Being 800 debentures issued at ₹ 20 premium, redeemable at ₹ 10 premium)
    2 marks

  3. (b) Balance Sheet of X Ltd. (extract)

    ParticularsNote No.₹
    I. Equity and Liabilities
    Non-current Liabilities: Long-term Borrowings14,00,000

    Note 1: Long-term Borrowings — Loan from IDBI Bank ₹ 4,00,000 (secured by the issue of 5,000 9% debentures of ₹ 100 each as collateral security).

    2 marks

Answer: (a)(i) Bank ₹ 67,500; Loss on Issue ₹ 11,250; Debentures ₹ 75,000; Premium on Redemption ₹ 3,750. (a)(ii) Bank ₹ 96,000; Debentures ₹ 80,000; Securities Premium ₹ 16,000; Loss on Issue and Premium on Redemption ₹ 8,000. (b) Loan from IDBI ₹ 4,00,000 under long-term borrowings, noted as secured by collateral debentures

Where the marks are

  • Entries for Arman Ltd. (2 marks)
  • Entries for Sohan Ltd. (2 marks)
  • Balance Sheet presentation of loan and collateral debentures (2 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 2024-25: 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.