Question : Pilot Pens Ltd. issued 5,000, 6% Debentures of Rs. 100 each at a discount of 20%. It had balance in Securities Premium Reserve of Rs. 60,000 and Rs. 10,000 in Surplus, i.e., Balance in Statement of Profit and Loss. Profit for the year before writing off the balance of Discount on the Issue of Debentures is Rs.20,000. Balance shown in the statement of profit and loss will be
Option 1: Rs 1,00,000
Option 2: Rs 10,000
Option 3: Rs 20,000
Option 4: Rs 30,000
Correct Answer: Rs 10,000
Solution : Answer = Rs 10,000
Discount on issue of Debentures = 1,00,000
(5000 @ 100 each) = 5,00,000 x 20/100
Securities Premium Reserve A/c Dr 60,000
Surplus in the Statement of Profit and Loss Dr 40,000
To discount on the issue of debentures A/c 1,00,000
| Profit and loss (balance) | 10,000 |
| (+) profit earned during the current year | 20,000 |
| 30,000 | |
| (-) Discount on issue of Debentures | (40,000) |
| Profit and loss | 10,000 |
Hence, the correct option is 2.
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