Debentures will be redeemed at a discount when the company is able to buy the debentures in the open market at a price lower than the face value of the debentures. Before redemption starts, there must be a balance of at least 50% of the amount of debentures issued in the Debenture Redemption Reserve.
Can we redeem debentures at discount?
No, debentures issued at premium or par cannot be redeemed at discount because redemption of debentures at discount implies that the debentureholders are getting lesser than what they have earlier invested at the time of issue.
What is discount on redemption of debentures?
On redemption, this account is debited and transferred to Debenture holders’ account. (c) Redemption at Discount: ADVERTISEMENTS: When debentures are redeemed at a price less than the face value of debenture it is termed as ‘redemption at discount’.
How debentures can be redeemed?
Debenture can be redeemed in various ways by a company. It can pay a lump sum on the date of maturity or may pay in annual installments. A company can also purchase it from the open market or convert to an equity share in case of convertible debentures. Innovative ways like call or put option can also be utilized.
Can debenture be redeemed on premium?
Debentures can either be redeemed at premium or par. Redemption signifies – repaying the number of debentures to debenture holders.
What debenture holders will get?
Debenture holders will be paid before preferred shareholders but may be subordinate to other types of debt on the company’s books such as senior loans. If the funds allow, a debenture holder may receive their full repayment of the bond’s principal with interest.
How is debenture discount calculated?
Amount of discount to be written off from Statement of Profit and Loss every year: Nominal Value of Debentures = 3,000 × ` 100 each = ` 3,00,000 5% Discount on Issue of Debentures i.e., ` 15,000. = ` 3,000. Note: Debentures are to be redeemed on maturity, i.e., at the end of 5 years.
What is not a type of debentures?
6. Non-redeemable Debentures: Non-redeemable Debentures cannot be redeemed in a Company’s lifetime. Non-redeemable Debentures are only paid back on company’s liquidation.
Is not fictitious asset?
These assets include a debit balance of profit and loss A/c and the expenditure not yet written off such as advertising expenses etc. Among the given options Discount on issues of shares and debentures is not the example of fictitious assets.
How many types of debentures are there?
Two types of debentures are issued by the companies: Convertible Debentures and Non-Convertible Debentures.
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Can I redeemed debentures before maturity?
Normally the debentures are redeemed by company at the expiry of their life by giving away the amount promised for. But sometimes company reserves the right to redeem the debentures even before the expiry of their life either by installments or by purchasing them from open market.
Can CCDs be redeemed?
Compulsorily convertible debenture also known as CCD is a type of debenture in which the whole value of the debenture must be converted into equity by a specified time. … No Debenture Redemption Reserve is required to be created in case of CCDs.
Is debenture a debt?
A debenture is a type of debt instrument that is not backed by any collateral and usually has a term greater than 10 years. … Both corporations and governments frequently issue debentures to raise capital or funds. Some debentures can convert to equity shares while others cannot.