Read the following passage and answer the following question.
ABC Ltd. issued 20,000, 6% debentures of ₹100 each at a discount of 4% redeemable at a premium of 5% after 3 years from 1st April 2017. The amount payable on the application is ₹50 and the balance on the allotment. The company has a balance of ₹50,000 in securities premium reserve and ₹1,00,000 in the capital reserve. Profit earned by the company in the year is ₹75,000.
How much premium is paid on redemption of debentures?
Answer & explanation
Correct answer: option 2
The correct answer is option 2- ₹1,00,000.
Face value of debentures = ₹100
No of debentures = ₹20,000
Premium on redemption = 5%
Amount of premium per debenture = 100 x 5/100
= ₹5
Total amount of premium = 20,000 x 5
= ₹1,00,000