State to whether the following statements are True/False.

The issue of debentures less than face value of debenture to termed as issue of debentures at discount.

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Solution

True

Explanation: When debentures are issued at a price less than their face value, it is known as ‘issue of debentures at discount’.

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J Ltd issued Rs 20,00,000, $15 %$ Debentures at $8 %$ discount. Debentures are to be redeemed in the following manner :

$\begin{matrix} Year-end & Face value of Debentures Rs 2 & 2, 00, 000 3 & 4, 00, 000 4 & 6, 00, 000 5 & 8, 00, 000 \end{matrix}$

Pass journal entry for issue of Debentures and prepare Discount on Issue of Debentures Account for 5 years.

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