Multiple choice

Win Ltd. issued 20,000, 8% debentures of Rs. 10 each at par, which are redeemable after 5 years at a premium of 20%. The amount of loss on redemption of debentures to be written off every year will be

  1. Rs. 40,000

  2. Rs. 10,000

  3. Rs. 20,000

  4. Rs. 8,000
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Redemption premium = 20% of Rs. 2,00,000 = Rs. 40,000. This is a loss written off over debenture life (5 years). Annual charge = Rs. 40,000/5 = Rs. 8,000. Loss on Redemption of Debentures Account debited annually.

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