The following journal entry appears in the books of X Co. Ltd.-
Bank A/c Dr. 4,75,000
Loss on issue of debenture A/c Dr. 75,000
To 12% Debentures A/c 5,00,000
To Premium on Redemption of Debenture A/c 50,000
Debentures have been issued at a discount of:
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → 5%
Loss on issue of debentures carries both the discount on issue and the premium payable on redemption, so the discount is the loss minus the premium.
Loss on issue of debentures = Rs. 75,000
Less: premium on redemption = Rs. 50,000
Discount on issue = Rs. 25,000
Rate of discount = Rs. 25,000 ÷ Rs. 5,00,000 × 100
= 5%
Check: Bank Rs. 4,75,000 = Rs. 5,00,000 − Rs. 25,000. Taking the whole Rs. 75,000 as discount gives 15%, which forgets the premium on redemption.
NCERT (2026-27 edition):
NCERT (2026-27 edition):
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