Based on following information answer question:

Apex Ltd. issued to public ₹10,00,000, 10% Debentures of ₹100 each at par, redeemable at a premium of 20%. It also issued 10,000, 11% Debentures ₹100 each as collateral security of against bank loan of ₹8,00,000. 

The company bought building worth ₹50,00,000 from Beta Ltd. against a cheque of ₹20,00,000 and balance by issue of 12% Debentures of ₹100 each at a premium of 20%.

By what amount debentures interest account be debited, if debenture interest is payable annually?

₹4,00,000

The correct answer is Option (2) - ₹4,00,000.

1) Issued to public ₹10,00,000, 10% Debentures.
Interest = 10,00,000 x 10/100
            = ₹1,00,000

2) Issued 10,000, 11% Debentures ₹100 each as collateral security of against bank loan of ₹8,00,000.
No interest is provided on debentures which are issued as a collateral security.

3) Building purchased and ₹30,00,000 paid by issue of 12% Debentures of ₹100 each at a premium of 20%.
No of debentures issued = 30,00,000/120
                                    = 25,000
Debentures amount = 25,000 x 100
                             = 25,00,000
Interest = 25,00,000 x 12/100
             = ₹3,00,000

Total interest = 1,00,000 + 3,00,000
                    = ₹4,00,000

So, total interest on debentures is ₹4,00,000. Interest is debited with ₹4,00,000. The journal entry for this-

Debenture Interest A/c Dr. ₹4,00,000
       To Debentureholders A/c   ₹4,00,000