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H Ltd. purchased machinery worth Rs.99,000 from P Ltd. The payment was made by issue of 12% debentures of Rs.100 each. Pass the necessary journal entries for the issue of debentures when debentures are issued at 10% discount in the books of H Ltd.

Solution

✅ Correct Option: 2

At a 10%10\% discount each debenture is issued for 9090. Number of debentures =99,00090=1,100= \frac{99,000}{90} = 1,100, so their face value is 1,100×100=1,10,0001,100 \times 100 = 1,10,000 and the discount is 11,00011,000.

The vendor's account is cleared for the purchase price of 99,00099,000, discount is debited as a loss, and the Debentures Account is credited at face value 1,10,0001,10,000.

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