Question :
Intel Ltd. issued 10,000, 7% Debentures of Rs. 100 each at a discount of 10%. It has Securities Premium Reserve of Rs.1,50,000.Discount on Issue of Debentures, i.e., Rs. 1,00,000 will be written off by passing the following entry
Option 1: Securities premium account debited by Rs 1,00,000 and credited discount on issue of debentures account
Option 2: Debited profit and loss account and credited discount on issue of debenture account by Rs 1,00,000
Option 3: Debited profit and loss adjustment account and credited discount on issue of debenture account
Option 4: None of theses
Correct Answer: Securities premium account debited by Rs 1,00,000 and credited discount on issue of debentures account
Solution : Answer = Securities premium account debited by Rs 1,00,000 and credited discount on issue of debentures account
(10,00,000×10%)
Discount on issue of debentures = Rs 1,00,000.
JOURNAL ENTRY
Securities Premium Reserve A/c Dr 1,00,000
To Discount on issue on Debentures A/c 1,00,000
Hence, the correct option is 1.