Savage Ltd. Purchased for cancellation its own 12,00,000, 9% debentures of ₹100 each at ₹85 each. The profit on cancellation of own debentures will be:
Answer & explanation
Correct answer: option 1
The correct answer is Option (1) → ₹1,80,00,000
When a company buys its own debentures below their face value and cancels them, the difference is a profit on cancellation (a capital profit).
Profit per debenture = ₹100 − ₹85 = ₹15
Profit on cancellation = 12,00,000 × ₹15 = ₹1,80,00,000
9% Debentures A/c Dr. ₹12,00,00,000
To Own Debentures A/c ₹10,20,00,000
To Profit on Cancellation of Own Debentures A/c ₹1,80,00,000
NCERT (2026-27 edition):
|
