(A) ₹ 20,000 & ₹16,000. Debentures in accounting represent the medium to long term instrument of debt that the large companies use to borrow money. Details listed below Registered folio number: 23240301 Certificate No. Step 1 - calculate the NPV of cash flows at 5% Step 2 - calculate the NPV of cash flows at 10% Step 3 - calculate the IRR using the below formula: IRR = a + [NPVa/ (NPVa-NPVb) (b-a)] a = first discount rate used b = second discount rate used NPV = Net Present Value Example 1 B Plc has £100,000 5% redeemable debentures in issue. Issue & Redemption of Debentures - Corporate and ... Add to cart. Further, the repayment of the Debentures i.e. The redemption value of the debentures is equal to the face value of the debentures. Important Questions for CBSE Class 12 Accountancy ... The company has ₹ 40,00,000 12% Debentures of ₹ 100 each. When debentures are issued at a discount? - Vlinch A fixed rate of interest cushions against market fluctuations, making the investment less risky. Where a company purchases its own debentures from the market , and cancels the Debentures so purchased, such an act of purchasing and cancellation of own debentures by the company is known as redemption of debentures by way of purchase in the open market. The rate of interest is a prefix value to the debenture, say 9% Debentures and, therefore, is payable even if the company incurs a loss. Calculate the amount of Debentures Redemption Reserve which needs to be created to meet the requirements of law. 02: Issue and Redemption of Debentures / Accountancy-II Calculate the amount of Debentures Redemption Reserve which needs to be created to meet the requirements of law. Accounting Ratios Class 12 Important Questions Accountancy ... 1000 is offered at 1,050, it is a case of issue of debentures at premium. Solution: Question 2. Or the money will be collected in installments, like with allotment, first call, second call, last call etc. When a company issues the debentures it is under the obligation to pay the debenture holder the interest at the pre-set rate at regular interval until the company pays off the debentures. How to calculate Redemption Of Debentures - StockMarketBox The debentures are repayable after 5 years; and (v) 300, 12% debentures of Rs 100 each as a collateral security to a bank which has advanced a loan of Rs 25,000 to the company for a period of 5 years. Redemption of Debentures; Depending on the terms of issue, debentures can either be redeemed at par or at a premium. However, it is a very unusual source of finance and is rarely followed. TS Grewal Accountancy Class 12 Solutions Chapter 10 ... ADVERTISEMENTS: A firm raises capital from different sources to finance a project. For example, if the face value of the debentures is Rs. Debentures are a type of debt instrument or bond that does not have any underlying collateral assets. Calculate the amount of Debentures Redemption Reserve which needs to be created to meet the requirements of law. Issue of Debentures: For Cash, For Consideration, As ... Calculate the Weighted Average Cost of Capital (WACC) of Offshore . Terms of Issue & Interest on Debentures: Concept ... Therefore it is necessary to calculate the cost of capital for each source. The sinking fund table shows that if investments earn 6% per annum, to get Re.1 at the end of 3 years, one has to invest Rs 0.31411 every year together with interest that . Under the terms of issue, 1/5th of the debentures are annually redeemable by drawings, the first redemption occurring on 31st December, 2010. Total of the ratios = 5 + 4 + 3 + 2+1 = 15. TS Grewal Accountancy Class 12 Solutions Chapter 10 ... Profit or loss on cancellation will be calculated by comparing the purchase price of debentures cancelled with this face value plus the premium payable on redemption according to the terms of the issue. The formula to calculate the post-tax cost of debt is: I * (1-T) / Market Value x 100%, where I is the Annual interest and T is the tax rate. Click for Solution The debentures current yield to maturity is 20%. Question 5. The company had issued 5,000, 12% Debentures of ₹ 500 each at par. It is a cash outflow. Answer: Meaning of debentures: → Debenture means "an instrument in writing issued by a company under its common seal, acknowledging its indebtedness for a certain sum of money and . Debentures Redemption Reserve ₹ 2,00,000. Solution. The Debentures are redeemable for an amount (the "Redemption Price") equal to principal amount of the Debentures plus accrued unpaid interest up to, but excluding, the Redemption Date. Will subsequent change in interest (Rate of interest as on 31st March 2018 is 18%) be considered? 5100 "Optionally Convertible Debentures" (OCD's) (Unsecured) of Rs. A. Partially Convertible Debenture - PCD: A type of convertible debenture, part of which will be redeemed by the issuing company after a specified period of time and part of which is convertible into . Additional Information: • Extract from the statement of comprehensive income: Profit after tax 2019 - R650 000 2018 - R601 800 2017 - R557 200 • The tax rate is 28%. Note: Whether debentures were issued at discount or at premium becomes irrelevant if conversion into shares takes place at the time of redemption of debenture is due.Suppose in 2008 10,00,000 debentures were issued at a discount of 5% with a term of 6 years.If in 2013, when the redemption is due, debentureholders are allowed to convert the debentures into shares, the relevant amount will be . 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