Non-Current Liabilities

1. R & R Ltd issues 10,000 zero coupon bonds at Rs 680 each. The
bonds have a tenor of 5 years at end of which they will be
redeemed at par. Estimate expenses for each of the 5 years.

2. On 1 Jan 2011, D Ltd. issues debentures (par value Rs 1000) for Rs

10 lakhs. The holder has an option to convert these debentures to a
fixed number of equity instruments of the issuer anytime up to a
period of 7 years. If the option is not exercised by the holder, the
debentures are redeemed at the end of 7 years. The debentures
carry a fixed coupon of 6% p.a. The prevailing market rate for
similar debentures, without the conversion feature, is 9% p.a.
Discuss accounting treatment.

3. REF issues 500 at par convertible bonds on 01/01/2014. The tenor

of the bonds is 5 years. The stated coupon (payable annually) is
10%. Interest rate on similar non-convertible debt is 15%. Each
bond is convertible in 50 equity shares of face value Rs 20. Show
treatment of Issue of Bonds, Annual Coupon Payments, Settlement
– assume no conversion at maturity, assume all bonds converted at
maturity, assume all bonds converted on 31/12/2017, repurchase of
all bonds on 31/12/2016 at Rs 525,000.