Question : When debentures are issued at premium and redeemed at premium, the journal entry will have the following combination:
(A) Discount on issue of debentures account is credited
(B) Loss on issue of debentures account is debited
(C) Security premium account is credited
(D) Premium on redemption of debentures account is credited
Option 1: (A), (B) and (D) only
Option 2: (A), (B) and (C) only
Option 3: (A), (B), (C) and (D)
Option 4: (B), (C) and (D) only
Correct Answer: (B), (C) and (D) only
Solution : Following is the Journal Entry for debentures issued at premium and redeemed at premium:
Debenture Application & Allotment A/c Dr.
Disount on Issue of Debentures A/c Dr.
Loss on Issue of Debentures A/c Dr.
To % Debentures A/c
To Premium on Redemption of Debentures A/c
To Securities Premium Reserve A/c
