Question

X Ltd. issued 2,000, 10% debentures of Rs. 100 each at a discount of 8% on April 01, 2019, which are redeemable. It has a balance in the Securities Premium Reserve of Rs. 30, 000. Calculate the amount to be written off from the securities Premium Reserve.

Answer 1

1. Total Face Value of Debentures:

Total Face Value = Number of Debentures × Face Value per Debenture

Total Face Value = 2,000 × 100

= 2,00,000

2. Total Discount on Issue:

Discount Amount = Total Face Value × Discount Rate

Discount Amount = `2,00,000 × 8/100`

= 16,000

3. Amount to Write Off:

Under Section 52(2) of the Companies Act, 2013, the Securities Premium Reserve (SPR) can be used to write off the discount allowed on the issue of debentures.

The available reserve (Rs. 30,000) is more than enough to cover the total discount (Rs. 16,000). Therefore, the entire Rs. 16,000 will be written off from the Securities Premium Reserve.