Doubts

SOLUTION When no profits are set aside for redemption of debentures it is called redemption out of Capital. In such a case no profit are transferred to Debenture Redemption Reserve.

SOLUTION (i) Redemption out of capital; (ii) Redemption out of profits.

SOLUTION Redemption of debentures means repayment of the amount of debentures to debentureholders. In other words, redemption refers to discharge of Liability on account of debentures by repaying the due…

SOLUTION Rs. 2,20,000.

SOLUTION Rs. 40,000.

SOLUTION Debenture Suspense A/c          Dr. 10,00,000 To Debentures A/c(Issue of 10,000 debentures of Rs. 100 each as collateral security against the bank loan of Rs. 8,00,000)

SOLUTION Yes:Reason: Interest on debentures has to be paid whether the Company earns profit or incurs loss.

SOLUTION It is considered as a capital profit because it is not an income arising from the normal course of business operations.

SOLUTION Distinction between ‘Premium on Issue’ and ‘Premium on Redemption’ of Debentures:  Premium on Redemption of DebenturesPremium on Redemption of Debentures1.It is a capital profit.It is a capital loss.2.It is…