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Question :

Citizen Ltd. issued 10,000, 6% Debentures of  Rs. 100 each at a discount of 10% redeemable at 10% premium. It has Securities Premium Reserve of  Rs. 1,75,000. Loss on Issue of Debentures  Rs. 2,00,000 will be written off by passing the following entry

Option 1: Debited securities premium with Rs 1,75,000 and credited loss on issue of debenture account Rs 1,75,000

Option 2: Debited securities premium reserve account with Rs 1,75,000 and debited surplus in profit and loss account Rs 25,000 and credited loss on issue of debenture account Rs 2,00,000

Option 3: Debited surplus in statement of profit and loss account Rs 2,00,000 and credited loss on issue of debentures account 

Option 4: None of these 


Team Careers360 9th Jan, 2024
Answer (1)
Team Careers360 25th Jan, 2024

Correct Answer: Debited securities premium reserve account with Rs 1,75,000 and debited surplus in profit and loss account Rs 25,000 and credited loss on issue of debenture account Rs 2,00,000


Solution : Answer = Debited securities premium reserve account with 1,75,000 and debited surplus in profit and loss account Rs 25,000 and credited loss on issue of debenture account Rs 2,00,000

Loss on Issue of Debentures = (1,00,000+1,00,000) = Rs 2,00,000


JOURNAL ENTRY

Securiites Premium Reseve A/c Dr                    1,75,000
Surplus i.e. Statement in Profit & Loss A/c Dr       25,000
To Loss on Issue of Debentures A/c                          2,00,000

Hence, the correct option is 2.

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