Company issues 10,000, 12% debentures of ₹100 each at par, redeemable at premium of 5% after 5 years. At the time of allotment: journal Entry will be:

Debenture Application and Allotment A/c Dr. ₹10,00,000

Loss of Issue of Debenture Dr.                     ₹50,000

       To 12% Debenture A/c                                        ₹10,00,000

      To premium on Redemption of Debentures A/c       ₹50,000

The correct answer is Option (4) → 

Debenture Application and Allotment A/c Dr. ₹10,00,000

Loss of Issue of Debenture Dr.                     ₹50,000

       To 12% Debenture A/c                                        ₹10,00,000

      To premium on Redemption of Debentures A/c       ₹50,000

10,000, 12% debentures of ₹100 each at par, redeemable at premium of 5% after 5 years.

Money received = 10,000 x 100
                        = 10,00,000

Premium on redemption = 10,000 x 5
                                    = 50,000

Premium on redemption is a known loss at the time of issue so it is debited at the time of journal entry. The following journal entry is passed for this-

Debenture Application and Allotment A/c Dr. ₹10,00,000 (Amount received)
Loss of Issue of Debenture Dr.                     ₹50,000 (Redemption of premium)
            To 12% Debenture A/c                                        ₹10,00,000
            To premium on Redemption of Debentures A/c       ₹50,000