X Ltd issued Rs. 5,00,000, 9% debentures of Rs. 100 each at a premium of 5% and these debentures are redeemable at a premium of 5%. What amount should be debited to Loss on Issue of Debenture Account?
Answer & explanation
Correct answer: option 2
Correct answer: Option (2) → Rs. 25,000
Concept: When debentures are issued at a premium but are redeemable at a premium, the Loss on Issue of Debentures equals only the premium payable on redemption (there is no discount on issue) – per Issue and Redemption of Debentures.
Face value of debentures = Rs 5,00,000; premium on redemption = 5% = Rs 25,000.
Since the issue is at a premium (not a discount), the Loss on Issue of Debentures A/c is debited only with the premium payable on redemption = Rs 25,000. (The securities premium on issue is credited separately and is not part of this loss.)