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Home Questions VZKF3CQXFQ
Target Exam

CUET

Subject

Accountancy

Chapter

Issue and Redemption of Debentures

Question:

What will be the journal entry for the issue of debenture of ₹100 at ₹98 but redeemed at a premium of ₹5 by the company?

Options:

Debenture Application & Allotment A/c Dr.  ₹100
Loss on Issue of Debentures A/c Dr.   ₹5
        To Debentures A/c                                                 ₹98
        To Premium on Redemption of Debentures A/c          ₹7
(Issue of debentures at discount and redeemed at premium)

Debenture Application & Allotment A/c Dr.  ₹98
Loss on Issue of Debentures A/c Dr.   ₹7
        To Debentures A/c                                                 ₹100
        To Premium on Redemption of Debentures A/c          ₹5
(Issue of debentures at discount and redeemed at premium)

Debenture Application & Allotment A/c Dr.  ₹98
Loss on Issue of Debentures A/c Dr.   ₹5
        To Debentures A/c                                                 ₹98
        To Premium on Redemption of Debentures A/c          ₹5
(Issue of debentures at discount and redeemed at premium)

Debenture Application & Allotment A/c Dr.  ₹100
Loss on Issue of Debentures A/c Dr.   ₹7
        To Debentures A/c                                                 ₹100
        To Premium on Redemption of Debentures A/c          ₹7
(Issue of debentures at discount and redeemed at premium)

Correct Answer:

Debenture Application & Allotment A/c Dr.  ₹98
Loss on Issue of Debentures A/c Dr.   ₹7
        To Debentures A/c                                                 ₹100
        To Premium on Redemption of Debentures A/c          ₹5
(Issue of debentures at discount and redeemed at premium)

Explanation:

Issue at discount and redemption at premium-
* Bank A/c Dr.
    To Debenture Application & Allotment A/c
 (Receipt of application money)

*Debenture Application & Allotment A/c Dr.
Loss on Issue of Debentures A/c Dr. (with discount on issue plus premium on redemption)
       To Debentures A/c (with nominal value of debenture)
       To Premium on Redemption (with premium on redemption) of Debentures A/c
(Allotment of debentures at a discount and redeemable at premium)

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