Question : Read the following information carefully and answer the question that follow:
On 1st April, 2019, Sunshine Ltd. issued Rs. 10,00,000, 15% Debentures of Rs. 100 each at 8% discount payable:
Rs. 40 on application, and
The balance on allotment.
These debentures were to be redeemed at a premium of 5% after five years. All the debentures were subscribed for by the public.
Interest on these debentures was to be paid half-yearly which was duly paid by the company.
Question:- Which of the following statements is correct? At the time of writing off Interest on debentures________.
Option 1: Statement of profit and loss account debited by Rs. 75,000
Option 2: Statement of profit and loss account Credited by Rs. 75,000
Option 3: Statement of profit and loss account debited by Rs. 1,50,000
Option 4: Statement of profit and loss account debited by Rs. 75,000
Correct Answer: Statement of profit and loss account debited by Rs. 1,50,000
Solution : Answer = Statement of profit and loss account debited by Rs. 1,50,000
At the end of the year interest on Debentures should be written off by Rs. 1,50,000.
Then the following journal entry will be passed
Statement of profit and loss Account Dr 1,50,000
To Interest on Debentures account A/c 1,50,000
Hence, the correct option is 3.
