Based on following case, answer question :
A Ltd. issued 2,000, 10% Debentures of ₹100 each on April 1, 2019 at a discount of 10% redeemable at a premium of 10% after five years. Company purchased assets of the book value of ₹ 2,20,000 from B Ltd. at book value and agreed to make payment of purchase consideration by issuing another 2,000, 10% Debentures of ₹100 each at a premium of 10% on the above-mentioned date only.
Entry for issue of Debentures to B Ltd. would be:
Answer & explanation
Correct answer: option 4
The correct answer is Option (4) → B Ltd. Dr ₹2,20,000 To 10% Debentures A/c ₹2,00,000 To Securities Premium Reserve A/c ₹20,000
Purchase consideration = ₹2,20,000
Issue price of one debenture = ₹100 + ₹10 premium = ₹110
Debentures issued = ₹2,20,000 ÷ ₹110 = 2,000
Face value credited to 10% Debentures A/c = 2,000 × ₹100 = ₹2,00,000
Premium credited to Securities Premium Reserve A/c = 2,000 × ₹10 = ₹20,000
B Ltd. (the vendor) is debited with ₹2,20,000, which discharges the amount the company owes it for the assets.
NCERT (2026-27 edition):
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