Question

Floater Ltd. issued 60,000; 8% debentures of ₹ 100 each at 5% Discount and to be redeemed at 10% premium at the end of 5 years. On the date of issue, balance in Securities Premium was ₹ 8,00,000 and Statement of Profit Loss (Dr.) was ₹ 5,00,000.

Premium on Redemption of Debentures account will have a balance of ______ to be treated as ______ in the first year.

Options

• ₹ 9,00,000; Non-Current Liabilities

• ₹ 9,00,000; Current Liabilities

• ₹ 6,00,000; Non-Current Liabilities

• ₹ 6,00,00; Current Liabilities

Answer 1

Premium on Redemption of Debentures account will have a balance of ₹ 6,00,000 to be treated as non-current liabilities in the first year.

Explanation:

Premium on redemption = 10% of ₹ 100 = ₹ 10 per debenture

Total debentures = 60,000

Premium on Redemption = 60,000 × 10

= ₹ 6,00,000