Question

On 1^st May, 2023, Amrit Ltd. issued 10,000, 10% debentures of ₹100 each at a premium of 10%, redeemable at a premium of 10%. Loss on issue of debentures will be:

• A. ₹2,00,000
• B. ₹1,30,000
• C. ₹1,00,000
• D. ₹80,000

Hint:

The loss on issue of debentures occurs when debentures are redeemed at a premium. This loss is accounted for as a capital expense and amortized over the debentures’ lifetime.

Answer 1

The Correct Option is C

Step 1: Calculate the issue price:
The issue price of each debenture is calculated as: \[ \text{Issue Price} = ₹100 + 10\% \text{ of } ₹100 = ₹110 \] Step 2: Calculate the redemption value:
The redemption value of each debenture is: \[ \text{Redemption Value} = ₹100 + 10\% \text{ of } ₹100 = ₹110 \] Step 3: Calculate the loss on issue of debentures:
The loss on issue of debentures arises from the premium on redemption. This loss is calculated as: \[ \text{Loss on Issue} = \text{Number of Debentures} \times \text{Premium on Redemption} \] \[ \text{Loss on Issue} = 10,000 \times ₹10 = ₹1,00,000 \] Conclusion:
The total loss on issue of debentures is \( ₹1,00,000 \).