Question : When debenture are issued at collateral security, the final entry for recording the transaction in the books is :
Option 1: Debit Debenture suspense account and credit debenture account
Option 2: Credit Debenture account and debit cash account
Option 3: Debit debenture suspense account and credit cash account
Option 4: None of the above
Correct Answer: Debit Debenture suspense account and credit debenture account
Solution : When a corporation receives a loan or overdraft from a bank or any other financial institution, a collateral security may be described as a subsidiary, secondary, or supplementary security in addition to the primary security. The following is the final journal entry for this transaction:
Debenture suspense A/c Dr.
To Debenture A/c
Hence the correct answer is option 1.
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