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    Question

    A company bought a new machinery worth Rs.4 lakh by issuing 10% Debentures of value Rs.160 were issued at a premium of 25%. How much amount is credited to the Debenture Account?

    A Rs.80000 Correct Answer Incorrect Answer
    B Rs.160,000 Correct Answer Incorrect Answer
    C Rs.300,000 Correct Answer Incorrect Answer
    D Rs.320,000 Correct Answer Incorrect Answer
    E Rs.280,000 Correct Answer Incorrect Answer

    Solution

    Since the debentures are issued at premium, the securities premium account will be credited with the premium amount while the debenture account will be credited with the face value. Total book value = Face value + premium Premium is 25% on face value or it can be said it is 20% on the book value. As such face value is 80% of book value = 80% * 400000 = Rs.320,000.

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