Question : On 1st April 2018, X Ltd. issued 20,000, 10% Debentures of Rs.100 each at a discount of 5% redeemable at a premium of 4% after 5 years. It is decided to write off the loss on the issue of debentures in the year ended 31st March 2019. It has the following balances :
Capital Reserve Rs.1,00,000 and Securities Premium Reserve Rs.50,000.
Question:- Which of the following statements is correct /true?
Option 1: Discount or Loss on issue may also be written off during the tenure (life) of the debentures either by Writing off an equal amount each year; or
Option 2: Writing off proportionate amount each year
Option 3: Both A and B
Option 4: None of the above
Correct Answer: Both A and B
Solution : Answer = Both A and B
Discounts on the issue of debentures may be written off during the life of the debentures either by writing off an equal amount each year or a proportionate amount each year.
Hence, the correct option is 3.
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