Tag: debentures redemption

Questions Related to debentures redemption

Which of these is not a method of redemption of debentures ?

  1. Purchase in open market

  2. Auction of debentures

  3. Drawing of lots

  4. Payment in lump sum


Correct Option: B

Debentures can be redeemable at discount.

  1. True

  2. False


Correct Option: B
Explanation:

Debentures will be redeemed at a discount only when the company is able to buy the debentures in the open market at a price lower than the face value of the debentures.

When a company issues debenture, it usually mentions the terms on which they will be redeemed on their maturity.

  1. True

  2. False


Correct Option: A

Premium on redemption is a/an  ____________ of a company payable in future.

  1. liability

  2. asset

  3. income

  4. expense


Correct Option: A

The Debenture Redemption Reserve account appears on the liability side of the balance sheet under the head ___________.

  1. capital

  2. reserves and surplus

  3. non-current liabilty

  4. current liability


Correct Option: B

Debentures cannot be redeemed out of :

  1. Profits

  2. Provision

  3. Capital

  4. All the above


Correct Option: A
Explanation:

Debentures can be written-off either by debiting it to profit and loss or to Debentures cannot be issued at a premium and redeemable at par.

When the debentures are redeemed, the requisite amount of Debenture Redemption Reserve is transferred to ___________.

  1. statutory reserve

  2. general reserve

  3. revenue

  4. CRR


Correct Option: B