Question

Shivalik Ltd. issued 7% debentures of ₹ 100 each at a discount of 5% on 1st April, 2023. Discount on issue of debentures, ₹ 1,00,000 was completely written off through Statement of Profit and Loss on 31st March, 2024. On issue of debentures, \textquote{Debentures Account} was credited with __________________.

• A. ₹ 10,00,000
• B. ₹ 20,00,000
• C. ₹ 19,00,000
• D. ₹ 1,00,000

Hint:

Discount on issue of debentures is treated as a loss and recorded separately in the books; debentures are credited at face value.

Answer 1

The Correct Option is C

Each debenture has a face value of ₹ 100. A 5% discount results in an issue price of ₹ 95. Let the number of debentures be \( x \) and the amount credited to the Debentures Account be ₹ \( y \).
To determine the number of debentures using the discount amount:

Calculation:

Discount per debenture = ₹ 5
Total discount = ₹ 1,00,000
Number of debentures = ₹ 1,00,000 / ₹ 5 = 20,000

Face value per debenture = ₹ 100
Total face value of debentures = 20,000 debentures × ₹ 100/debenture = ₹ 20,00,000

Issue price per debenture = ₹ 95
Cash received = 20,000 debentures × ₹ 95/debenture = ₹ 19,00,000

Entries:
Credit to Debentures Account = ₹ 20,00,000
Debit to Discount on Issue of Debentures Account = ₹ 1,00,000

Conclusion:
The Debentures Account was credited with ₹ 20,00,000, and ₹ 1,00,000 was debited to Discount on Issue of Debentures Account. Therefore, the net cash received is ₹ 19,00,000.
Final Answer: (C)