The following journal entry appears in the books of XYZ Co. Ltd.

Bank A/c Dr. 4,80,000
Loss on issue of debentures A/c Dr. 1,50,000
To 12% Debentures A/c 6,00,000
To Premium on Redemption of Debenture A/c 30,000

Calculate the rate at which debentures have been issued at a discount.

20%

Correct answer: Option (3) → 20%

Concept: Loss on Issue of Debentures = discount on issue + premium payable on redemption, as shown in Issue and Redemption of Debentures.

Loss on issue debited = Rs 1,50,000; premium on redemption (credited) = Rs 30,000.
Therefore discount on issue = 1,50,000 – 30,000 = Rs 1,20,000.
Discount rate = 1,20,000 / 6,00,000 × 100 = 20%.
Check: Bank received Rs 4,80,000 = 6,00,000 – 1,20,000, confirming a 20% discount.