Read the following information and answer the 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 of discount allowed is to be written off from the statement of profit and loss?

0

The correct answer is option 4- 0

Amount debited to the loss on issue of debentures is the discount allowed on issue of debentures.
Discount on issue = 100 x 4/100
                            = ₹4

Total no of debentures =  20,000
Total amount debited to loss on issue of debentures = 20,000 x 4
                                                                                   = ₹80,000

Amount to be written off first from the securities premium and then from capital reserve and the remaining from statement of profit and loss.
So, securities premium  has balance of 50,000 and capital reserve has balance of 1,00,000 means total balance is ₹1,50,000.

After writing off discount for ₹80,000 from the capital profit the Remaining balance (1,50,000 - 80,000) i.e. ₹70,000 is still left. So, there is no use of statement of profit and loss (75,000). The whole discount can be written off from the capital profit. So, the correct answer is 0.