Question

If a company issues Rs. 1,00,000, 9% debentures of Rs. 100 each at a discount of 5% but redeemable at a premium of 5%, then what amount will be debited to Loss on Issue of Debentures Account?

• A. Rs. 5,000
• B. Rs. 10,000
• C. Rs. 15,000
• D. Rs. 20,000

Hint:

Always add discount on issue and premium on redemption to calculate Loss on Issue of Debentures.

Answer 1

The Correct Option is C

Step 1: Understand the accounting treatment.
Loss on Issue of Debentures = Discount on issue of debentures + Premium on redemption of debentures.

Step 2: Calculate discount on issue.
Debentures issued = Rs. 1,00,000 (i.e., 1,000 debentures of Rs. 100 each).
Discount = 5% of 1,00,000 = Rs. 5,000.

Step 3: Calculate premium on redemption.
Premium = 5% of 1,00,000 = Rs. 5,000.

Step 4: Total Loss on Issue.
\[ \text{Loss on Issue of Debentures} = 5,000 + 5,000 = Rs. 10,000 \] Wait carefully — the problem asks: Issued at 5% discount + Redeemable at 5% premium. That means: - Discount = Rs. 5,000. - Premium on redemption = Rs. 5,000. So, total loss = Rs. 10,000. But the options give 15,000 as well. Let's recheck: If both discount (5,000) and premium (10,000?) are counted differently? Actually, at Rs. 100 each, 1,000 debentures = Rs. 1,00,000.
Discount = 5,000.
Premium on redemption = 5,000.
Total = Rs. 10,000. Thus, the correct answer is Rs. 10,000.

Final Answer: \[ \boxed{\text{Rs. 10,000}} \]