Question

Ayush Ltd. issued 50,000, 8% Debentures of ₹ 100 each at par redeemable at a premium. Loss on Issue of Debentures was written off ₹ 5,00,000 from Securities Premium and Statement of Profit & Loss each. At what rate, these debentures will be redeemed?

Options

• ₹ 105.

• ₹ 110.

• ₹ 115.

• ₹ 120.

Answer 1

₹ 120.

Explanation:

Total Loss on Issue of Debentures:

₹ 5,00,000 + ₹ 5,00,000 = ₹ 10,00,000

Since debentures are issued at par, this loss represents premium on redemption.

Premium rate = `(10,00,000)/(50,00,000) xx 100 = 20%`

Hence, redemption price = ₹ 100 + ₹ 20 = ₹ 120.