Can Debentures Be Issued At Premium?

How is share issue of premium calculated?

Share Premium Reserve Formula(Issue price per share – Face value/par value per share) * No of shares.OR.Total amount received on issue of shares – Total par value of shares issued.For example, XYZ Company issued 500 shares at $15 per share having a par value of $10 per share..

What is debenture interest rate?

A debenture pays a regular interest rate or coupon rate return to investors. Convertible debentures can be converted to equity shares after a specified period, making them more appealing to investors. In the event of a corporation’s bankruptcy, the debenture is paid before common stock shareholders.

What is Debenture with example?

The definition of a debenture is a long-term bond issued by a company, or an unsecured loan that a company issues without a pledge of assets. An interest-bearing bond issued by a power company is an example of a debenture.

What are the types of debenture?

Companies use debentures when they need to borrow the money at a fixed rate of interest for its expansion. Secured and Unsecured, Registered and Bearer, Convertible and Non-Convertible, First and Second are four types of Debentures.

What is the difference between share and debenture?

Shares are the company-owned capital. Debentures are the borrowed capital of the company. The person who holds the ownership of the shares is called as Shareholders. The person who holds the ownership of the Debentures is called as Debenture holders.

Why debentures are issued?

Why do company issue debentures, when they can borrow money from Bank. … When bank lend money they generally place restriction on how that money can be used. ex- borrowed fund can be used only for capital expenditure or they limit companies ability to raise additional funds till this loan is repaid. etc.

Can debentures be redeemed at premium?

(a) Redeemable Debentures: Redeemable debentures are those which are payable on the expiry of the specific period either in lump sum or in Instalments during the life time of the company. Debentures can be redeemed either at par or at premium.

How share premium is calculated?

A share premium is the difference between the issue price and the nominal value of the share, i.e., market value less par value. Then, the market value of each unit of equity is = $1,000,000 / 250,000 = $4. … Share premium = market value – nominal value = 4 – 1 = $3.

What is the journal entry for issue of shares at a premium?

1. Premium is due at the time of application.DateParticulars1. On receipt of Application moneyBank A/c (application and premium amount)Dr.To Share Application A/cCr.(Being application money received on shares)2. Transfer of application money to Share Capital A/c and Securities Premium A/cShare Application A/cDr.15 more rows

Are debentures current liabilities?

Noncurrent liabilities include debentures, long-term loans, bonds payable, deferred tax liabilities, long-term lease obligations, and pension benefit obligations. The portion of a bond liability that will not be paid within the upcoming year is classified as a noncurrent liability.

Is debenture a loan?

In the United States, a debenture is a loan that is backed by the full faith and credit of the issuer. This means that, in the US at least, a debenture is a type of Unsecured Loan, with the high creditworthiness of the borrower prompting the lender to make the loan.

How is Debenture interest calculated?

We calculate Interest on debentures at a fixed rate on its nominal (face) value payable quarterly, half yearly or yearly as per the terms of issue. The rate of interest is a prefix value to the debenture, say 9% Debentures and, therefore, is payable even if the company incurs a loss. It is a charge against profit.

Can one person company issue debentures?

The private company is in an advantageous position as it can issue debentures and accept deposits from the public. 3. Even though the idea of OPC is to enable an individual to start his own business without the need to have a partner but, procedurally a suitable nominee has to be selected.

What is premium on issue of debentures?

Debentures are said to be issued at a premium when the amount collected for it, is greater than the nominal value (face value) of the debentures. In other terms, it is when the issue price is greater than the face value of the debentures.

Can shares be issued at premium?

Companies can issue shares at face value of the share, while there is an option to issue shares at premium which means shares will be issued to the public for a value which is more than the face value of the shares.

When can debentures be issued?

A company can issue secured debentures for a period not exceeding 10 years from the date of its issue. If the company is engaged in setting up of infrastructure projects it can issue debentures for a period exceeding 10 years but not exceeding 30 years.

What is debenture and its characteristics?

The debenture is a written instrument that the company sign under its common seal, acknowledging the debt due by it to the debenture holder. … The company promises to pay the periodic payment of interest to the holder for the use of his funds.

Can debentures be issued without interest?

Interest rate in respect of debentures is freely determinable by the issuer company. The interest may be paid quarterly, half-yearly or on any other terms of its issue. Zero Rates of Interest Debentures: Company can issue this type of debenture, Rate of interest in these debentures will be zero.