A company had issued - 80,000,12% debentures of 100 each on 1st April, 2021. The debentures were due for redemption on 1st March, 2025. The terms of…

CA Foundation · Accounting · RTP · January 2026
A company had issued - 80,000,12% debentures of 100 each on 1st April, 2021. The debentures were due for redemption on 1st March, 2025. The terms of issue of debentures provided that they were redeemable at a premium of 5%. The company offered an option to the debenture holders to convert redeemable value of 20% of their holding into equity shares (nominal value - 10) at a predetermined price of 15 per share and the payment in cash for remaining debentures.100 debentures holders holding totally - 10,000 debentures did not exercise the option. Calculate the number of equity shares to be allotted to the debenture holders and the amount to be paid in cash on redemption.

Suggested Answer and Working Notes:

Calculation of number of equity shares to be allotted Particulars Number of debentures Total number of debentures 80,000 Less: Debenture holders not opted for conversion (10, 000) Debenture holders opted for conversion 70,000 Option for conversion20% Number of debentures to be converted (20% of70,000) 14,000 Redemption value of14,000 debentures at a premium of5% [₹ 14,000 x (₹ 100+5)] = 14,70,000 Equity shares of 10each issued to debenture holders on redemption = [₹ 14,70,000/15] = 98,000 shares Amount of cash to be paid Amount to be paid into cash [₹ 84,00,000 (₹ 80,000 x 105) - 14,70,000] on redemption = 69,30,000

Topics: Issue of Debentures

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