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:
Answer & explanation
Correct answer: option 4
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