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 ₹100 each as collateral security of against 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.
Apex Ltd. issued to public ₹10,00,000, 10% Debentures of ₹100 each at par, redeemable at a premium of 20%.
As these debentures are redeemable at premium so it is a known loss to the company which will be debited at the time of issue.
JOURNAL ENTRY ON ISSUE OF SHARES-
Debenture Application & Allotment A/c Dr. ₹10,00,000 (10,000 X 100 amount received)
Loss on Issue of Debentures A/c Dr. ₹2,00,000 (10,000 x 20 premium on redemption)
To Debentures A/c ₹10,00,000 (10,000 X 100 nominal value of debenture)
To Premium on Redemption of Debenture A/c ₹2,00,000 (10,000 x 20 premium on redemption)
Thus, loss on issue of debentures is ₹2,00,000.