Based on following case, answer question :
A Ltd issued 2000, 10% debenture of ₹100 each on April 1, 2019 at a discount of 10% redeemable at a premium of 10% after five years. Company purchased assets of the book value of ₹ 2,20,000 from B Ltd. at book value and agreed to make payment of purchase consideration by issuing another 2000, 10% Debentures of ₹100 each at a premium of 10% on above mentioned date only.
Loss on issue of Debentures A/c to be written off out of statement of P and L will be:
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) - ₹20,000.
Securities premium on redemption = 2,00,000 x 10/100
= 20,000
Discount on issue of debentures = 2,00,000 x 10/100
= 20,000
Securities premium received on debentures = 2000 x 10
= 20,000
Total loss = 40,000
Available balance in reserve = 20,000
Remaining balance = 40,000 - 20,000
= 20,000
This remaining balance will be written off from the statement of P and L.