Practicing Success
Read the following passage and answer the following question. ABC Ltd. took over Assets of ₹6,00,000 and Liabilities of ₹40,000 of XYZ Ltd. at an agreed value of ₹6,30,000. ABC Ltd. issued 10% Debentures of ₹100 each at a discount of 10% to XYZ Ltd. in full satisfaction of the purchase price. ABC Ltd. writes off any capital losses incurred during a year, at the end of that financial year. |
If the company has a securities premium reserve of ₹65,000, then how much amount will be taken from the statement of profit and loss to write off discount on debentures? |
₹4,000 ₹7,500 ₹5,000 ₹6,000 |
₹5,000 |
The correct answer is option 3- ₹5,000. Nominal value of debenture = ₹100 No of debenture issued = Purchase consideration/ issue price Discount = 7000 X 10 Securities premium reserve is of ₹65,000 so the balance (70,000-65,000) i.e. 5,000 will be taken from the statement of profit and loss. |