Read the following information and answer the question.
ABC Ltd. issued 20,000, 6% debentures of ₹100 each at a discount of 4% redeemable at a premium of 5% after 3 years from 1st April 2017. The amount payable on the application is ₹50 and the balance on the allotment. The company has a balance of ₹50,000 in securities premium reserve.
What is the total amount of discount allowed on issue of debentures?
Answer & explanation
Correct answer: option 2
The correct answer is option 2- ₹80,000.
Face value of debentures = ₹100
No of debentures = ₹20,000
Discount on issue = 100 x 4/100
= ₹4
Total amount of discount allowed on debentures = 20,000 x 4
= ₹80,000