A company had issued - 40,000,12% debentures of 100 each on 1 st April, 2020. The debentures were due for redemption on 1 st March, 2024. The terms…

CA Foundation · Accounting · RTP · September 2024
A company had issued - 40,000,12% debentures of 100 each on 1 st April, 2020. The debentures were due for redemption on 1 st March, 2024. 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 .50 debentures holders holding totally - 5,000 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 Number of debentures Total number of debentures 40,000 Less: Debenture holders not opted for conversion (5, 000) Debenture holders opted for conversion 35,000 Option for conversion 20% Number of debentures to be converted (20% of35,000) 7,000 Redemption value of7,000 debentures at a premium of5% [₹ 7,000 x (₹ 100+5)] = 7,35,000 Equity shares of 10each issued to debenture holders on redemption [₹ 7,35,000/15] = 49,000 shares Amount of cash to be paid Amount to be paid into cash [₹ 42,00,000 (₹ 40,000 x 105) - 7,35,000] on redemption = 34,65,000

Topics: Redemption of Debentures

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