Read the following passage and answer the following question.
ABC Ltd. issued 20,000, 6% debentures of ₹100 each at a discount of 4% redeemable at a premium of 5% after 3 years from 1st April 2017. The amount payable on the application is ₹50 and the balance on the allotment. The company has a balance of ₹50,000 in securities premium reserve and ₹1,00,000 in the capital reserve. Profit earned by the company in the year is ₹75,000.
How much amount is debited in the account loss on the issue of debentures at the time of the amount due on allotment?
Answer & explanation
Correct answer: option 3
The correct answer is option 3- ₹1,80,000.
Amount debited to the loss on issue of debentures is the discount allowed on issue and premium at redemption.
Discount on issue = 100 x 4/100
= ₹4
Premium on redemption = 100 x 5/100
= ₹5
Total amount of loss = 4 + 5
= ₹9
Total no of debentures = 20,000
Total amount debited to loss on issue of debentures = 20,000 x 9
= ₹1,80,000