Question
Accountancy Question on Accounting for Share and Debenture Capital
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
A
(A), (B), and (D) only
B
(A), (B), and (C) only
C
(A), (B), (C), and (D)
D
(B), (C), and (D) only
Answer
(A), (B), (C), and (D)
Explanation
Solution
When debentures are issued at a premium, the Security Premium Account (C) is credited. When debentures are redeemed at a premium, the Premium on Redemption of Debentures Account (D) is credited. The Loss on Issue of Debentures Account (B) is debited for the loss on issue. Correct Answer: Option 3.