The company purchased plant with a book value of ₹1,90,000 from National Victory Company and agreed to pay via issuing 2000, 10% Debentures of ₹100 each at a discount of 5%. Amount that will be credited to 10% Debenture A/c will be:
Answer & explanation
Correct answer: option 2
The correct answer is option 2- ₹2,00,000.
Journal entry for the purchase of plant-
Plant A/c Dr. ₹1,90,000
To National Victory Co. ₹1,90,000
Journal entry for the issue of debentures in consideration of purchase of plant-
National Victory Co. Dr ₹1,90,000
Discount on issue Dr ₹10,000
To 10% debentures A/c ₹2,00,000
(Issue of 2,000 debentures at discount)
Debentures A/c = 2,000 x 100
= 2,00,000
Discount = 100 x 5/100
= 5
Discount amount = 2,000 x 5
= 10,000