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W 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 of every year will be:
- a)Rs. 40,000
- b)Rs. 10,000
- c)Rs. 20,000
- d)Rs. 8,000
Correct answer is option 'D'. Can you explain this answer?
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W Ltd. issued 20,000, 8% debentures of Rs. 10 each at par, which are r...
Calculation of Redemption Amount
The face value of each debenture is Rs. 10.
The premium on redemption is 20%, therefore, the redemption value of each debenture will be Rs. 12 (Rs. 10 + 20% of Rs. 10).
The total redemption amount will be 20,000 × Rs. 12 = Rs. 2,40,000.
Calculation of Loss on Redemption
Since the debentures were issued at par, the company received only Rs. 10 per debenture at the time of issue. However, it will have to pay Rs. 12 per debenture at the time of redemption, resulting in a loss of Rs. 2 per debenture (Rs. 12 - Rs. 10).
The total loss on redemption will be 20,000 × Rs. 2 = Rs. 40,000.
Allocation of Loss on Redemption
The loss on redemption of debentures is a capital loss and cannot be charged against the profits of the year in which the debentures are redeemed. Therefore, the loss has to be spread over the years between the issue and redemption of the debentures.
The loss on redemption will be spread over the 5-year period between the issue and redemption of the debentures. Therefore, the amount of loss to be written off every year will be Rs. 40,000 ÷ 5 = Rs. 8,000.
Therefore, option 'D' is the correct answer, and the amount of loss on redemption of debentures to be written off every year will be Rs. 8,000.
The face value of each debenture is Rs. 10.
The premium on redemption is 20%, therefore, the redemption value of each debenture will be Rs. 12 (Rs. 10 + 20% of Rs. 10).
The total redemption amount will be 20,000 × Rs. 12 = Rs. 2,40,000.
Calculation of Loss on Redemption
Since the debentures were issued at par, the company received only Rs. 10 per debenture at the time of issue. However, it will have to pay Rs. 12 per debenture at the time of redemption, resulting in a loss of Rs. 2 per debenture (Rs. 12 - Rs. 10).
The total loss on redemption will be 20,000 × Rs. 2 = Rs. 40,000.
Allocation of Loss on Redemption
The loss on redemption of debentures is a capital loss and cannot be charged against the profits of the year in which the debentures are redeemed. Therefore, the loss has to be spread over the years between the issue and redemption of the debentures.
The loss on redemption will be spread over the 5-year period between the issue and redemption of the debentures. Therefore, the amount of loss to be written off every year will be Rs. 40,000 ÷ 5 = Rs. 8,000.
Therefore, option 'D' is the correct answer, and the amount of loss on redemption of debentures to be written off every year will be Rs. 8,000.
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Community Answer
W Ltd. issued 20,000, 8% debentures of Rs. 10 each at par, which are r...
(12*20000-10*20000) = 40000
total 5 yrs
per year 40000/5 = 8000
total 5 yrs
per year 40000/5 = 8000
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W 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 of every year will be:a)Rs. 40,000b)Rs. 10,000c)Rs. 20,000d)Rs. 8,000Correct answer is option 'D'. Can you explain this answer?
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W 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 of every year will be:a)Rs. 40,000b)Rs. 10,000c)Rs. 20,000d)Rs. 8,000Correct answer is option 'D'. Can you explain this answer? for CA Foundation 2024 is part of CA Foundation preparation. The Question and answers have been prepared according to the CA Foundation exam syllabus. Information about W 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 of every year will be:a)Rs. 40,000b)Rs. 10,000c)Rs. 20,000d)Rs. 8,000Correct answer is option 'D'. Can you explain this answer? covers all topics & solutions for CA Foundation 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for W 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 of every year will be:a)Rs. 40,000b)Rs. 10,000c)Rs. 20,000d)Rs. 8,000Correct answer is option 'D'. Can you explain this answer?.
W 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 of every year will be:a)Rs. 40,000b)Rs. 10,000c)Rs. 20,000d)Rs. 8,000Correct answer is option 'D'. Can you explain this answer? for CA Foundation 2024 is part of CA Foundation preparation. The Question and answers have been prepared according to the CA Foundation exam syllabus. Information about W 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 of every year will be:a)Rs. 40,000b)Rs. 10,000c)Rs. 20,000d)Rs. 8,000Correct answer is option 'D'. Can you explain this answer? covers all topics & solutions for CA Foundation 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for W 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 of every year will be:a)Rs. 40,000b)Rs. 10,000c)Rs. 20,000d)Rs. 8,000Correct answer is option 'D'. Can you explain this answer?.
Solutions for W 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 of every year will be:a)Rs. 40,000b)Rs. 10,000c)Rs. 20,000d)Rs. 8,000Correct answer is option 'D'. Can you explain this answer? in English & in Hindi are available as part of our courses for CA Foundation.
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W 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 of every year will be:a)Rs. 40,000b)Rs. 10,000c)Rs. 20,000d)Rs. 8,000Correct answer is option 'D'. Can you explain this answer?, a detailed solution for W 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 of every year will be:a)Rs. 40,000b)Rs. 10,000c)Rs. 20,000d)Rs. 8,000Correct answer is option 'D'. Can you explain this answer? has been provided alongside types of W 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 of every year will be:a)Rs. 40,000b)Rs. 10,000c)Rs. 20,000d)Rs. 8,000Correct answer is option 'D'. Can you explain this answer? theory, EduRev gives you an
ample number of questions to practice W 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 of every year will be:a)Rs. 40,000b)Rs. 10,000c)Rs. 20,000d)Rs. 8,000Correct answer is option 'D'. Can you explain this answer? tests, examples and also practice CA Foundation tests.
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