Chapter issue-and-redemption-of-debentures: Issue and Redemption of Debentures Assertion-Reason Questions | accountancy Class 12 CBSE

Chapter issue-and-redemption-of-debentures: Issue and Redemption of Debentures Assertion-Reason Questions | accountancy Class 12 CBSE | ByteNotes.in

Assertion-Reason

Easy difficulty • Check the statement and reason

Easy

Question 1

Logic Check

Assertion (A): Debenture is a part of owned capital of a company. Reason (R): Debentures represent a loan raised by the company from the public and are repayable after a specified period.

Reasoning Options

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Assertion-Reason

Easy difficulty • Check the statement and reason

Easy

Question 2

Logic Check

Assertion (A): Interest on debentures is paid even if the company has not earned any profit. Reason (R): Interest on debentures is a charge against profits, not an appropriation of profits.

Reasoning Options

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Assertion-Reason

Easy difficulty • Check the statement and reason

Easy

Question 3

Logic Check

Assertion (A): Shareholders have voting rights in the company. Reason (R): Debentureholders also enjoy full voting rights in the company.

Reasoning Options

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Assertion-Reason

Medium difficulty • Check the statement and reason

Medium

Question 4

Logic Check

Assertion (A): Bearer debentures can be transferred by mere delivery without executing a transfer deed. Reason (R): The company keeps a register of all bearer debentureholders with their names and addresses.

Reasoning Options

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Assertion-Reason

Medium difficulty • Check the statement and reason

Medium

Question 5

Logic Check

Assertion (A): Discount on issue of debentures is a capital loss. Reason (R): Discount on issue of debentures can be written off from Securities Premium Reserve or Statement of Profit and Loss.

Reasoning Options

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Assertion-Reason

Hard difficulty • Check the statement and reason

Hard

Question 6

Logic Check

Assertion (A): When debentures are issued at a discount and redeemable at a premium, both the discount and premium are debited to 'Loss on Issue of Debentures A/c'. Reason (R): 'Discount on Issue of Debentures A/c' is used when debentures are issued at a discount and redeemable at par.

Reasoning Options

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Assertion-Reason

Easy difficulty • Check the statement and reason

Easy

Question 7

Logic Check

Assertion (A): Securities Premium Reserve is credited when debentures are issued at a premium. Reason (R): The premium on issue is shown on the liabilities side of the balance sheet under 'Reserves and Surplus'.

Reasoning Options

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Assertion-Reason

Medium difficulty • Check the statement and reason

Medium

Question 8

Logic Check

Assertion (A): Under the First Method of collateral security, a journal entry is passed debiting Debenture Suspense A/c and crediting Debentures A/c. Reason (R): Under the First Method, no journal entry is recorded as no liability is created by the issue of debentures as collateral security.

Reasoning Options

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Assertion-Reason

Medium difficulty • Check the statement and reason

Medium

Question 9

Logic Check

Assertion (A): Premium on Redemption of Debentures Account is shown under Non-current Liabilities in the balance sheet. Reason (R): It represents a future liability payable to debentureholders at the time of redemption.

Reasoning Options

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Assertion-Reason

Medium difficulty • Check the statement and reason

Medium

Question 10

Logic Check

Assertion (A): Profit on cancellation of own debentures purchased from open market below face value is transferred to Capital Reserve. Reason (R): This profit is a capital profit and not available for distribution as dividends.

Reasoning Options

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Assertion-Reason

Medium difficulty • Check the statement and reason

Medium

Question 11

Logic Check

Assertion (A): Zero Coupon Rate Debentures do not carry any interest rate. Reason (R): Zero Coupon Rate Debentures compensate investors by being issued at substantial discount, with the difference between nominal value and issue price being the implicit interest.

Reasoning Options

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Assertion-Reason

Easy difficulty • Check the statement and reason

Easy

Question 12

Logic Check

Assertion (A): Debentures can be converted into shares if the terms of issue so provide. Reason (R): All debentures issued by companies are convertible debentures.

Reasoning Options

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Assertion-Reason

Medium difficulty • Check the statement and reason

Medium

Question 13

Logic Check

Assertion (A): The Companies Act, 2013 imposes restrictions on issue of debentures at a discount. Reason (R): Companies can issue debentures at any discount as no restriction is imposed by the Companies Act, 2013.

Reasoning Options

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Assertion-Reason

Medium difficulty • Check the statement and reason

Medium

Question 14

Logic Check

Assertion (A): Debenture Redemption Investment must be made on or before April 30 each year. Reason (R): The DRI amount invested must be at least 15% of the value of debentures maturing during the year ending March 31 of the next year.

Reasoning Options

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Assertion-Reason

Hard difficulty • Check the statement and reason

Hard

Question 15

Logic Check

Assertion (A): Listed companies must mandatorily create Debenture Redemption Reserve before redeeming debentures. Reason (R): Listed companies are exempt from creating DRR and may redeem debentures out of capital.

Reasoning Options

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Assertion-Reason

Medium difficulty • Check the statement and reason

Medium

Question 16

Logic Check

Assertion (A): In case of over subscription of debentures, the company can allot more debentures than offered to the public. Reason (R): A company cannot allot more debentures than it has invited for subscription; excess application money is refunded or adjusted.

Reasoning Options

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Assertion-Reason

Medium difficulty • Check the statement and reason

Medium

Question 17

Logic Check

Assertion (A): When debentures are issued for consideration other than cash to a vendor, no cash changes hands. Reason (R): In such cases, the vendor's account is credited for the value of assets purchased and debited when debentures are allotted.

Reasoning Options

ByteNotes

Assertion-Reason

Medium difficulty • Check the statement and reason

Medium

Question 18

Logic Check

Assertion (A): When purchase consideration is more than the net assets taken over, Goodwill is debited. Reason (R): When purchase consideration is less than net assets taken over, Capital Reserve is credited.

Reasoning Options

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Assertion-Reason

Medium difficulty • Check the statement and reason

Medium

Question 19

Logic Check

Assertion (A): Redemption by conversion into equity shares is applicable to all types of debentures. Reason (R): Redemption by conversion is applicable only to convertible debentures as specified in the terms of issue.

Reasoning Options

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Assertion-Reason

Medium difficulty • Check the statement and reason

Medium

Question 20

Logic Check

Assertion (A): A fixed charge is created on specific assets of the company. Reason (R): A floating charge is created on specific assets held for sale in the ordinary course of business.

Reasoning Options

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Chapter sections

Chapter issue-and-redemption-of-debentures: Issue and Redemption of Debentures | Assertion-Reason

Assertion (A): Debenture is a part of owned capital of a company. Reason (R): Debentures represent a loan raised by the company from the public and are repayable after a specified period.

Assertion (A): Interest on debentures is paid even if the company has not earned any profit. Reason (R): Interest on debentures is a charge against profits, not an appropriation of profits.

Assertion (A): Shareholders have voting rights in the company. Reason (R): Debentureholders also enjoy full voting rights in the company.

Assertion (A): Bearer debentures can be transferred by mere delivery without executing a transfer deed. Reason (R): The company keeps a register of all bearer debentureholders with their names and addresses.

Assertion (A): Discount on issue of debentures is a capital loss. Reason (R): Discount on issue of debentures can be written off from Securities Premium Reserve or Statement of Profit and Loss.

Assertion (A): When debentures are issued at a discount and redeemable at a premium, both the discount and premium are debited to 'Loss on Issue of Debentures A/c'. Reason (R): 'Discount on Issue of Debentures A/c' is used when debentures are issued at a discount and redeemable at par.

Assertion (A): Securities Premium Reserve is credited when debentures are issued at a premium. Reason (R): The premium on issue is shown on the liabilities side of the balance sheet under 'Reserves and Surplus'.

Assertion (A): Under the First Method of collateral security, a journal entry is passed debiting Debenture Suspense A/c and crediting Debentures A/c. Reason (R): Under the First Method, no journal entry is recorded as no liability is created by the issue of debentures as collateral security.

Assertion (A): Premium on Redemption of Debentures Account is shown under Non-current Liabilities in the balance sheet. Reason (R): It represents a future liability payable to debentureholders at the time of redemption.

Assertion (A): Profit on cancellation of own debentures purchased from open market below face value is transferred to Capital Reserve. Reason (R): This profit is a capital profit and not available for distribution as dividends.

Assertion (A): Zero Coupon Rate Debentures do not carry any interest rate. Reason (R): Zero Coupon Rate Debentures compensate investors by being issued at substantial discount, with the difference between nominal value and issue price being the implicit interest.

Assertion (A): Debentures can be converted into shares if the terms of issue so provide. Reason (R): All debentures issued by companies are convertible debentures.

Assertion (A): The Companies Act, 2013 imposes restrictions on issue of debentures at a discount. Reason (R): Companies can issue debentures at any discount as no restriction is imposed by the Companies Act, 2013.

Assertion (A): Debenture Redemption Investment must be made on or before April 30 each year. Reason (R): The DRI amount invested must be at least 15% of the value of debentures maturing during the year ending March 31 of the next year.

Assertion (A): Listed companies must mandatorily create Debenture Redemption Reserve before redeeming debentures. Reason (R): Listed companies are exempt from creating DRR and may redeem debentures out of capital.

Assertion (A): In case of over subscription of debentures, the company can allot more debentures than offered to the public. Reason (R): A company cannot allot more debentures than it has invited for subscription; excess application money is refunded or adjusted.

Assertion (A): When debentures are issued for consideration other than cash to a vendor, no cash changes hands. Reason (R): In such cases, the vendor's account is credited for the value of assets purchased and debited when debentures are allotted.

Assertion (A): When purchase consideration is more than the net assets taken over, Goodwill is debited. Reason (R): When purchase consideration is less than net assets taken over, Capital Reserve is credited.

Assertion (A): Redemption by conversion into equity shares is applicable to all types of debentures. Reason (R): Redemption by conversion is applicable only to convertible debentures as specified in the terms of issue.

Assertion (A): A fixed charge is created on specific assets of the company. Reason (R): A floating charge is created on specific assets held for sale in the ordinary course of business.

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