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1 mark

The following journal entry appears in the books of X Co. Ltd.Bank A/c Dr. 4,75,000Loss on issue of debenture A/c Dr. 75,000To 12% Debentures A/c 5,00,000To Premium on Redemption of Debenture A/c 50,000In this case the debentures have been issued at a discount of 5% . What is the rate of premium on redemption of debentures?

  1. A
    5%
  2. B
    15%
  3. C
    20%
  4. D
    10%

Solution & Step-by-step Explanation

Let's analyze the accounts from the provided journal entry:Nominal Value (Face Value) of Debentures = .Value credited to Premium on Redemption of Debentures Account = .The rate of premium on redemption is calculated relative to the total nominal face value:

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The following journal entry appears in the books of X Co. Ltd.Bank A/c Dr. 4,75,000Loss on issue of debenture A/c Dr. 75,000To 12% Debentures A/c 5,00,000To Premium on Redemption of Debenture A/c 50,000In this case the debentures have been issued at a discount of 5% . What is the rate of premium on redemption of debentures?
A
5%
B
15%
C
20%
D
10%

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Company AccountsDebenturesRedemption Premium

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