Based on following, answer question.
XYZ Ltd. has been operating in the field of FMCG products in South Indian market. However to expand its operation in northen part of India, it needs additional capital ₹20,00,000 which is raised by issuing 10% Debenture of ₹12,00,000 of ₹100 issued at a discount of 10% to be repayable after 6 years. The rest of the funds is raised by issuing 5% debenture of ₹8,00,000 of ₹100 issued at 15% premium. These debentures are perpetual in nature. After six years of successful operation in northern India, company took a loan of ₹5,00,000 from PNB against 5% debenture of ₹8,00,000 of ₹100 each as a collateral security. The company successfully ran its operation and managed to pay off its loan within two years.
If 5% debenture of ₹8,00,000 of ₹100 were issued at 15% premium. Amount is payable as ₹25 on applications, ₹50 on the allotment and ₹40 on 1st and final call.
How much amount should be credited to "Security Premium Reserve A/c".
Answer & explanation
Correct answer: option 1
The correct answer is Option (1) → ₹1,20,000
A debenture issued for more than its face value is issued at a premium. Only the excess over the face value goes to Securities Premium Reserve; the face value goes to the Debentures Account.
Number of debentures = ₹8,00,000 ÷ ₹100 = 8,000
Premium per debenture = 15% of ₹100 = ₹15
Securities Premium Reserve = 8,000 × ₹15 = ₹1,20,000
The instalments (₹25 + ₹50 + ₹40 = ₹115) only show when the money is collected; they do not change the total premium.
NCERT (2026-27 edition): |