W Ltd issued 10,000, 12% Debentures of ₹100 each at a ₹10 Premium, redeemable at a 10% premium. How much amount will be debited to Loss on the issue of Debenture account?
Answer & explanation
Correct answer: option 3
The correct answer is option 3- ₹1,00,000.
10,000, 12% Debentures of ₹100 each at a ₹10 Premium, redeemable at a 10% premium.
Premium on Redemption = 10% of 10,00,000
= 1,00,000 (Loss on issue of Debentures)
Following Journal entry is passed for transaction debentures issued at premium and redeemed at premium.
Bank A/c Dr. (10,000 x 110) 11,00,000
To Debenture Application & Allotment A/c (10,000 x 110) 11,00,000
(Receipt of application money)
Debenture Application & Allotment A/c Dr. (10,000 x 110) 11,00,000
Loss on Issue of Debentures A/c Dr. (with premium on redemption) (10,000 x 10) 1,00,000
To Debentures A/c (with nominal value of debenture) (10,000 x 100) 10,00,000
To Securities Premium Reserve A/c (with premium on issue) (10,000 x 10) 1,00,000
To Premium on Redemption of Debentures A/c (with premium on redemption) (10,000 x 10) 1,00,000