Based on following information answer question:
Apex Ltd. issued to public ₹10,00,000, 10% Debentures of ₹100 each at par, redeemable at a premium of 20%. It also issued 10,000, 11% Debentures of ₹100 each as collateral security against a bank loan of ₹8,00,000.
The company bought building worth ₹50,00,000 from Beta Ltd. against a cheque of ₹20,00,000 and balance by issue of 12% Debentures of ₹100 each at a premium of 20%.
"Loss on issue of Debentures" will be :
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → ₹2,00,000
When debentures are issued at par but are redeemable at a premium, the premium that will be paid on redemption is a liability of the company from the day of issue. It is provided for at the time of issue by debiting Loss on Issue of Debentures Account and crediting Premium on Redemption of Debentures Account.
Number of 10% debentures = ₹10,00,000 ÷ ₹100 = 10,000
Premium on redemption per debenture = 20% of ₹100 = ₹20
Loss on issue of debentures = 10,000 × ₹20 = ₹2,00,000
The other two issues add nothing to this loss. The 11% debentures given to the bank as collateral security are not a real issue, and the 12% debentures given to Beta Ltd. are issued at a premium of 20%, which is a gain credited to Securities Premium, not a loss.
NCERT (2026-27 edition): |