CA Foundation · Accounting · Company Accounts
Nair Ltd. issued 5,000 12% debentures of ₹100 each at a discount of 4%, redeemable at a premium of 6% after some years. The total Loss on Issue of Debentures to be recorded is:
The total loss on issue of debentures is ₹50,000. On face value of ₹5,00,000, the issue discount of 4% is ₹20,000 and the redemption premium of 6% is ₹30,000. Both represent costs to the company, so they are added together and debited to the loss account.
- A₹50,000Correct
- B₹30,000
- C₹20,000
- D₹10,000
Explanation
Face value = ₹5,00,000. Discount on issue = 4% = ₹20,000. Premium on redemption = 6% = ₹30,000. Total loss = 20,000 + 30,000 = ₹50,000. Option ₹30,000 ignores the discount, while ₹20,000 ignores the redemption premium.
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