A company issued 30,000, 9% Debentures of Rs. 100 each at 5% premium. These debentures are to be redeemed at 15% premium at the end of 4 years. Existing Balance in Securities Premium before Issue of Debentures was Rs. 80,000. Identify the amount to be debited to Statement of Profit and Loss for writing off Loss on issue of Debentures.
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → Rs. 2,20,000
Face value of debentures = 30,000 × Rs. 100 = Rs. 30,00,000
Loss on issue (premium payable on redemption @ 15%) = Rs. 4,50,000
Securities premium available = Rs. 80,000 (existing) + Rs. 1,50,000 (5% premium on this issue) = Rs. 2,30,000
The loss is written off first from the securities premium, and the balance from the Statement of Profit and Loss:
Debited to Statement of Profit and Loss = Rs. 4,50,000 − Rs. 2,30,000 = Rs. 2,20,000
NCERT (2026-27 edition): |