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.
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) - ₹5,50,000.
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 + premium on redemption
= ₹5,00,000 + 50,000
* Premium is paid out of securities premium but still it is paid in cash. So, total cash outflow is ₹5,50,000.