Question

William Pens Ltd. issued 10,000, 7% Debentures of ₹ 100 each at a discount of ₹ 4. It has a balance in Securities Premium of ₹ 25,000. It will write off Discount on Issue of Debentures as ______.

Options

• ₹ 40,000 from Securities Premium.

• ₹ 40,000 from Statement of Profit & Loss.

• ₹ 25,000 from Securities Premium and ₹ 15,000 from Statement of Profit & Loss (Finance Cost).

• ₹ 15,000 from Securities Premium and ₹ 25,000 from Statement of Profit & Loss (Finance Cost).

Answer 1

William Pens Ltd. issued 10,000, 7% Debentures of ₹ 100 each at a discount of ₹ 4. It has a balance in Securities Premium of ₹ 25,000. It will write off Discount on Issue of Debentures as ₹ 25,000 from Securities Premium and ₹ 15,000 from Statement of Profit & Loss (Finance Cost).

Explanation:

Total discount on issue of debentures:

10,000 × ₹ 4 = ₹ 40,000

Securities Premium available = ₹ 25,000. Therefore, the remaining amount is:

₹ 40,000 − ₹ 25,000 = ₹ 15,000

So, ₹ 25,000 is written off from Securities Premium and ₹ 15,000 from Statement of Profit & Loss.