A company issues 1000 9% debentures of ₹100 each at a premium of 5% and redeemable at a premium of 10%. The amount of loss on issue of debentures account will be:
Answer & explanation
Correct answer: option 2
The correct answer is option 2- ₹10,000.
Journal entry on receiving application money-
Bank A/c Dr. ₹1,05,000 (1000 x 105)
To Debenture Application & Allotment A/c ₹1,05,000 (1000 x 105)
(Receipt of application money)
Journal entry on transferring application money-
Debenture Application & Allotment A/c Dr. ₹1,05,000 (1000 x 105)
Loss on Issue of Debentures A/c Dr. (with premium on redemption) ₹10,000 (1000 x 10)
To Debentures A/c (with nominal value of debenture) ₹1,00,000 (1000 x 100)
To Securities Premium Reserve A/c (with premium on issue) ₹5,000 (1000 x 5)
To Premium on Redemption of Debentures A/c (with premium on redemption) ₹10,000 (1000 x 10)
Thus, the amount of loss on issue of debentures account will be 10,000.