Deck 21: Debentures, Bonds, and Shares

Question 1

Debentures represent the :

A)Long-term Borrowings of a Company
B)The Investment of Equity-Shareholders
C)Directors' shares in a company
D)Short-term Borrowings of a Company

Answer 1

Long-term Borrowings of a Company

Question 2

Zero Coupon Bonds are issued :

A)At Zero Interest Rate
B)With Specified Rate of Interest
C)Without Specified Rate of Interest
D)None of These

Answer 2

Without Specified Rate of Interest

Question 3

Interest payable on debentures is :

A)an appropriation of profits of the company
B)a charge against profits of the company
C)transferred to sinking fund investment account
D)transferred to general reserve

Answer 3

a charge against profits of the company

Question 4

A debenture holder is entitled to :

A)Fixed dividend
B)Share in profits
C)Voting rights in the company
D)Interest at the fixed rate

Question 5

On liquidation of company, principal amount of debentures is returned :

A)First of All
B)Last of All
C)Before Equity Capital
D)After Equity Capital

Question 6

Which of the following statements is false?

A)Debenture is a form of public borrowing.
B)It is customary to prefix debentures with the agreed rate of interest.
C)Debenture interest is a charge against profits.
D)The issue price and redemption value of debentures cannot differ.

Question 7

Which of the following is not a characteristic of Bearer Debentures?

A)They are treated as negotiable instruments.
B)Their transfer requires a deed of transfer.
C)They are transferable by mere delivery.
D)The interest on it is paid to the holder irrespective of identity.

Question 8

Which of the following statements is false?

A)At maturity, debenture holders get back their money.
B)Debentures can be forfeited for non-payment of call money.
C)In company's balance sheet, debentures are shown under the head Long term Borrowings.
D)Interest on debentures is a charge against profits

Question 9

Which of the following statements is false :

A)A Company can issue redeemable debentures.
B)A Company can issue debentures with voting rights.
C)A Company can issue convertible debentures.
D)A Company can buy its own debentures and shares.

Question 10

The Principal amount of debentures will be repaid by the company either at the end of a specified period or by instalments during the life time of the company. Such types of debentures are called :

A)Redeemable Debentures
B)Irredeemable Debentures
C)Convertible Debentures
D)Bearer Debentures

Question 11

The debentures whose principal amount is not repayable by the company during its life time, but the payment is made only at the time of Liquidation of the company, such debentures are called :

A)Bearer Debentures
B)Redeemable Debentures
C)Irredeemable Debentures
D)Non-Convertible Debentures

Question 12

Debenture Application Account is in the nature of

A)Real Account
B)Personal Account
C)Nominal Account
D)None of the above

Question 13

Discount on issue of Debentures is in the nature of

A)Revenue loss
B)Capital loss
C)Deferred Revenue Expenditure
D)None of the above

Question 14

Premium received on issue of debentures may be utilised for

A)For writing off discount allowed on issue of shares
B)For writing off premium allowed on redemption of debentures
C)For writing off preliminary expenses
D)For All of the Above

Question 15

If the rate of G/P is 25% of sales and the cost of goods sold is ` 150000, the amount of G/P will be

A)`30000
B)`25000
C)`40000
D)`50000

Question 16

Share application account is classified as

A)Real account
B)Personal account
C)Impersonal account
D)Nominal account

Question 17

The minimum share application is

A)1% of the face value
B)5% of the face value
C)10% of the face value
D)25% of the face value

Question 18

The excess price received on the par value of the shares should be credited to

A)Calls in advance
B)Reserve capital account
C)Security premium reserve account
D)None of these

Question 19

Which of the following should be deducted from the share capital to determine the paid up share capital.

A)Calls in advance
B)Calls in arrears
C)Security premium reserve
D)Discount on issue of shares.

Question 20

The security premium will be shown under the heading

A)Share capital
B)Current liability
C)Current assets
D)None of these

Question 21

The rate of discount on shares cannot exceed

A)5%
B)10%
C)6%
D)None of these

Question 22

Premium on issue of shares can be used for

A)Issue of bonus shares
B)Distribution of profit
C)Transferring to general reserve.
D)None of these

Question 23

When shares are forfeited the share capital account is debited by

A)Paid up amount
B)Called up amount,
C)Calls in arrear
D)Nominal value of such share.

Question 24

The profit on reissue of forfeited shares is transferred to

A)General reserve
B)Capital reserve
C)Capital redemption reserve
D)None of these

Question 25

When an existing company offers it shares for sale to the existing shareholders, it is known as

A)Private placement
B)Bonus issue.
C)Right issue
D)Offer for sale