Debenture of ₹5,00,000 were redeemed at 10% Premium. Premium in Redemption of Debenture was provided out of Securities Premium.

Determine Cash Outflow of Financing Activities.

₹5,00,000

The correct answer is Option (1) - ₹5,00,000.

Face value of debentures redeemed = ₹5,00,000

Premium on redemption = 10% of face value

Premium on Redemption = 10% of ₹5,00,000
                                    = ₹50,000

Total Cash Outflow = Face value 
                            = ₹5,00,000

* Premium is paid out of securities premium so there is no cash outflow as premium on redemption. So total cash outflow is ₹5,00,000.