Question

Sunstar Ltd. issued 1,60,000, 10% Debentures of ₹ 100 each at certain rate of discount and were to be redeemed at 20% premium. Balance of Securities Premium before issuing of these debentures was ₹ 50,00,000 and after writing off Loss on Issue of Debentures, the balance in Securities Premium was ₹ 10,00,000. At what rate of discount, these debentures were issued?

Options

• 10%

• 5%

• 25%

• 15%

Answer 1

5%

Explanation:

Securities Premium used = ₹ 50,00,000 − ₹ 10,00,000 = ₹ 40,00,000.

Premium on redemption = ₹ 1,60,00,000 × 20% = ₹ 32,00,000.

Therefore, discount = ₹ 40,00,000 − ₹ 32,00,000 = ₹ 8,00,000, i.e., 5%.