The following journal entry appears in the books of X Co. Ltd.-
Bank A/c Dr. 4,75,000
Loss on issue of debenture A/c Dr. 75,000
To 12% Debentures A/c 5,00,000
To Premium on Redemption of Debenture A/c 50,000
In this case the debentures have been issued at a discount of 5%. What is the rate of premium on redemption of debentures?
Answer & explanation
Correct answer: option 4
The correct answer is Option (4) → 10%
The credit to Premium on Redemption of Debentures Account is the premium the company will pay on redemption. Its rate is that amount as a percentage of the face value of the debentures.
Face value of debentures = Rs. 5,00,000
Premium on redemption = Rs. 50,000
Rate = Rs. 50,000 ÷ Rs. 5,00,000 × 100 = 10%
Check with the loss: discount of 5% (Rs. 25,000) + premium Rs. 50,000 = Rs. 75,000, which is the debit to Loss on Issue of Debentures Account in the entry. Taking the whole Rs. 75,000 as the premium gives 15%.
NCERT (2026-27 edition):
NCERT (2026-27 edition):
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