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Accounting for Companies-I




                    Notes          Practical Questions:
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                                   4.  A Limited had   2, 00,000; 12% Debentures on 1  January, 2005. In accordance with the
                                       power under  the  deed, the  directors  acquired from  the open  market  for  immediate
                                       cancellation of debentures as follows:
                                       March 1, 2005   40,000 at   98 cum-interest. August 1, 2005   80,000 at  cum-interest. 15
                                       December, 2005   20,000 at   Ex-interest. Debenture interest is payable half yearly i.e., 30  th
                                                 st
                                       June and 31  December every year.
                                       Show the ledger accounts of (i) 12% Debentures Account (ii) Debenture Interest.

                                   Ans: Profit on cancellation of debentures is: (i) on 1  March,   1,600 (ii) On 1  August,   600 (iii)
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                                                                                                st
                                       On 15  December,   300.
                                            th
                                   5.  On 31  March 2004 Varun Ltd.’s balance sheet showed 10,000 12% Debentures of   100 each
                                            st
                                                                                                   st
                                       outstanding. Interest on debentures is payable on 30  September; and 31  March every
                                                                                  th
                                       year. On 1  August 2004, the company purchased 500 of its own debentures as investment
                                                st
                                       at   97 ex-interest.
                                       Pass journal entries for purchase and disposal of own debentures in each one of the following
                                       cases:
                                       (i)  The company cancels all its own debentures on 1  March 2005.
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                                       (ii)  The company resells all its own debentures at   105 cum-interest on 1  March 2005.
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                                       Also show journal entries relating to debenture interest and interest on own debentures as
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                                       on 31  March 2005 in case (i) mentioned above.
                                   6.  (i)  Swati Associates Limited has issued 10,000; 12% Debentures of   100 each on 1.1.2003.
                                            These debentures are redeemable after three years at a premium of   5 per debenture.
                                            Interest is payable annually.
                                       (ii)  On October 1, 2004 it buys 1,500 debentures from the market at   98 per debenture.
                                            These are sold away on June 30, 2005 at   105 per debenture.
                                       (iii)  On January 1, 2005, it buys 1,000 debentures at   104 per debenture from the open
                                            market. These are cancelled on April 1, 2005.
                                       (iv)  On October 1, 2005 it buys 2,000 debentures of   106 per debenture from the open
                                            market. These  debentures,  along  with other  debentures, are  redeemed  on  31  st
                                            December, 2005.
                                       Prepare the relevant ledger accounts, showing the above transactions. Working should
                                       form part of you answer.
                                   Ans: Profit on cancellation of own debentures transferred to capital reserve are   1, 57,833.

                                   Answers: Self  Assessment

                                   1.  True                              2.   False
                                   3.  False                             4.   False

                                   5.  a                                 6.   Redemption
                                   7.  Debentures                        8.   Company
                                   9.  Expired                           10.  Empowers
                                   11.  Legal                            12.  Interest




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