Question : Debentures can be redeemed by utilising -
Option 1: Redemption Out of Capital
Option 2: Redemption Out of Profit
Option 3: Redemption Partly out of Profits and Partly out of Capital
Option 4: All of the Above
Correct Answer: All of the Above
Solution : (i) Redemption Out of Capital: When debentures are redeemed without adequate profits being transferred from Surplus, i.e., Statement of Profit and Loss to Debentures Redemption Reserve (DRR), at the time of redemption of debenture, such redemption is said to be out of capital.
(ii) Redemption Out of Profits: When debentures are redeemed only out of profits and an amount equal to the nominal (face) value of Debentures is transferred from Surplus, i.e., Statement of Profit and Loss to Debentures Redemption Reserve (DRR) before the redemption of debentures, such redemption is said to be out of profits.
(iii) Redemption Partly out of Profits and Partly out of Capital: It means that the company does not transfer 100 percent nominal (face) value of total redeemable debentures of a particular series to DRR from Surplus, i.e., Balance in Statement of Profit and Loss.
Hence the Correct answer is 4.
Question : Debentures are redeemed without setting aside an amount to Debentures Redemption Reserve (DRR). It is called redemption ________.
Option 1: Out of capital
Option 2: Out of profit
Option 3: Both 1 and 2
Option 4: None of the above
Question : When Debentures are redeemed setting aside 10% of nominal (face) value of outstanding debentures to Debentures Redemption Reserve (DRR) known as redemption out of --------
Question : When Debentures are redeemed setting aside amount equivalent to nominal (face) value of outstanding debentures to Debentures Redemption Reserve (DRR). It is known as redemption -------
Question : Choose which of the following statements is true?
Option 1: If a company sets aside profit to Debentures Redemption Reserve, it means redemption is not out of capital alone.
Option 2: If a company sets aside profit equivalent to nominal (face) value of outstanding debentures to Debentures Redemption Reserve, it means redemption is out of profits.
Option 1: Surplus, i.e., Balance in Statement of Profit and Loss cannot be transferred to Debentures Redemption Reserve.
Option 2: At least 10% of the redeemable value of debentures should be set aside to Debentures Redemption Reserve before the redemption of debentures.
Option 3: Debentures can be redeemed out of capital except by Unlisted companies that are not NBFCs or HFCs.
Option 4: Unlisted NBFCs and HFCs cannot redeem debentures out of capital alone because they haveto transfer amount to Debentures Redemption Reserve.
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