Question : Home Products Ltd. issued on 1st April, 2019,10,000,9% Debentures of Rs. 100 each at a premium of 10% redeemable at a premium of 5% after 5 years. Issue price was payable along with application. Which of the following statements is correct?
Option 1: Loss on issue of debenture account will be debited by Rs. 50,000
Option 2: Premium on Redemption of Debentures account credited by Rs. 50,000
Option 3: Premium of Redemption of Debentures account will be credited by Rs. 1,00,000
Option 4: Securities premium account will be credited by Rs. 1,00,000
Correct Answer: Premium of Redemption of Debentures account will be credited by Rs. 1,00,000
Solution : Answer = Premium of Redemption of Debentures account will be credited by Rs. 1,00,000
Premium on Redemption of Debentures Account will be credited by Rs. 10,00,000 X 5% = Rs. 50,000.
The securities premium reserve account will be credited by Rs. 1,00,000.
Hence, the correct option is 3.
