Redemption of debentures with securities premium
This query is : Open
12 June 2015
I recently saw a problem in Tulsian's book.
Where the debentures can be redeemed in cash or equity shares of Rs 10.
Total 9% debentures = Rs 250000
The result is given as:
Debentureholders ac 257500
Dr.
To cash ac Rs 107500
To Equity share capital Rs 30000
To securities premium Rs 120000
My question is, how can it be redeemed against securities premium ac?
12 June 2015
You have not given the full question but from the amounts it is clear that the equity shares of Rs.10 each have been issued at a premium. The amount credited to securities premium account is premium charged on issue of equity shares to redeem the debentures. The debentures are not redeemed against securities premium but 3,000 equity shares of Rs.10 have been issued at a premium of Rs.40, i.e. at a price of Rs.50 each, to redeem part of the debentures.
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