Question

Globe Ltd. issues 20,000, 9% debentures of ₹ 100 each at a discount of 5%, redeemable at the end of 5 years at a premium of 6%. For what amount ‘Loss on Issue of Debentures Account’ will be debited?

Options

• ₹ 1,00,000

• ₹ 1,20,000

• ₹ 2,80,000

• ₹ 2,20,000

Answer 1

₹ 2,20,000

Explanation:

Given:

Number of debentures = 20,000

Face value per debenture = ₹ 100

Discount on issue = 5% of ₹ 100 = ₹ 5 per debenture

Premium on redemption = 6% of ₹ 100 = ₹ 6 per debenture

Calculate total discount on issue:

₹ 5 × 20,000 = ₹ 1,00,000

Calculate total premium on redemption:

₹ 6 × 20,000 = ₹ 1,20,000

Total Loss on Issue of Debentures:

₹ 1,00,000 + ₹ 1,20,000 = ₹ 2,20,000.