Question

Aarav Ltd. issued 10,000, 9% debentures of Rs.100 each at a premium of 5%, redeemable at a premium of 10%. Loss on issue of debentures account will be debited by:

• A. Rs.10,00,000
• B. Rs.1,00,000
• C. Rs.1,50,000
• D. Rs.1,05,000

Hint:

The loss on issue of debentures is calculated by subtracting the premium received on issue from the premium payable on redemption.

Answer 1

The Correct Option is B

Step 1: Calculate the total premium payable at redemption:
The debentures are redeemable with a \(10\%\) premium. The premium on redemption is calculated as:\[ {Premium on Redemption} = 10,000 \times Rs.10 = Rs.1,00,000.\]Step 2: Calculate the total premium received at issue:
The debentures were issued at a \(5\%\) premium. The premium received on issue is calculated as:\[ {Premium on Issue} = 10,000 \times Rs.5 = Rs.50,000.\]Step 3: Calculate the net loss on issue of debentures:
The loss on issue of debentures is the difference between the premium payable at redemption and the premium received at issue:\[ {Loss on Issue} = Rs.1,00,000 - Rs.50,000 = Rs.50,000.\]Conclusion:
The loss on issue of debentures account will be debited by \( Rs.50,000 \).