Question : The Company will pay a premium at the time of their redemption. Although such premium will be paid at the time of actual redemption, as it is a known ------- the Company records such loss at the time of issue by -------- an account called, ------------------------.
Option 1: Profit, debiting, loss on issue of debentures
Option 2: Loss, credited, loss on issue of debentures
Option 3: Loss, debiting, loss on issue of debentures
Option 4: Loss, debiting, premium on redemption of debentures
Correct Answer: Loss, debiting, loss on issue of debentures
Solution : Answer = Loss, debiting, loss on issue of debentures
The known loss at the time of the debenture issue is recorded by debiting the loss account and crediting the loss on the issue of the debenture's account. This anticipatory treatment aligns with the principle of prudence, recognizing potential losses at the time of occurrence rather than waiting until redemption when the loss is realized. Hence, the correct option is 3.
Question : Which of the following statements is false?
Option 1: Loss on Issue of Debentures is debited at the time of issue of debentures following the Prudence Concept of Accounting.
Option 2: Loss on Issue of Debentures is written off from Securities Premium Reserve, if it exists and thereafter from Statement of Profit and Loss.
Option 3: Loss on Issue of Debentures Account is an Expense Account and Premium on Redemption of Debentures Account is a Liability Account.
Option 4: Premium on Redemption of Debentures Account is credited at the time of payment, i.e., on redemption of debentures.
Question : Home Products Ltd. issued on 1st April, 2019,10,000,9% Debentures of Rs. 100 each at a premium of 10% redeemable at a premium of 5% after 5 years. Issue price was payable along with application. Which of the following statements is correct?
Option 1: Loss on issue of debenture account will be debited by Rs. 50,000
Option 2: Premium on Redemption of Debentures account credited by Rs. 50,000
Option 3: Premium of Redemption of Debentures account will be credited by Rs. 1,00,000
Option 4: Securities premium account will be credited by Rs. 1,00,000
Question : KTR Ltd., issued 365, 9% Debentures of Rs. 1,000 each on 4th March, 2016 at 6% discount, redeemable at 5% premium. Loss on issue of Debentures debited/credited with _____________.
Option 1: Loss on issue of debentures account debited with Rs.36,500
Option 2: Loss on issue of debentures credited with Rs.41,150
Option 3: Loss on issue of Debentures debited with Rs. 41,150
Option 4: Loss on issue of debentures debited with Rs. 40,150
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