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A Ltd. issued 10,000 12% Debentures of Rs. 10 each at par which are redeemable at the end of each year in equal lots in 5 years at a premium of 30%. The amount of loss on redemption of debentures to be written off in fourth and fifth year will be:
- a)Rs. 10,000, Nil
- b)Rs. 4,000, 4000
- c)Rs. 4,000, 2000
- d)Rs. 6,000, 24000
Correct answer is option 'D'. Can you explain this answer?
Verified Answer
A Ltd. issued 10,000 12% Debentures of Rs. 10 each at par which are re...
Loss on Redemption of Debentures
To calculate the loss on redemption of debentures in the fourth and fifth year, we need to consider the premium amount and the face value of the debentures.
Given:
- Number of debentures issued = 10,000
- Face value of each debenture = Rs. 10
- Premium on each debenture = 30%
Step 1: Calculate the Premium Amount
The premium on each debenture is 30% of the face value. So, the premium amount per debenture is:
Premium amount = 30/100 * Rs. 10 = Rs. 3
Step 2: Calculate the Total Premium Amount
To calculate the total premium amount, we multiply the premium amount per debenture by the number of debentures issued.
Total Premium Amount = Rs. 3 * 10,000 = Rs. 30,000
Step 3: Calculate the Redemption Value
The redemption value is the sum of the face value and the premium amount. In this case, since the debentures are redeemable in equal lots over 5 years, the redemption value will remain the same for each lot.
Redemption Value = Face Value + Premium Amount = Rs. 10 + Rs. 3 = Rs. 13
Step 4: Calculate the Loss on Redemption
The loss on redemption is the difference between the redemption value and the face value. In this case, since the debentures were issued at par, the face value is equal to the issue price.
Loss on Redemption = Redemption Value - Face Value = Rs. 13 - Rs. 10 = Rs. 3
Step 5: Allocate the Loss on Redemption
Since the debentures are redeemable in equal lots over 5 years, we need to allocate the loss on redemption over these years. The total loss on redemption is Rs. 3 for each debenture.
In the fourth year, 1/5th of the debentures will be redeemed. So, the loss on redemption in the fourth year will be:
Loss on Redemption in Fourth Year = Rs. 3 * (1/5) * 10,000 = Rs. 6,000
In the fifth year, the remaining 4/5th of the debentures will be redeemed. So, the loss on redemption in the fifth year will be:
Loss on Redemption in Fifth Year = Rs. 3 * (4/5) * 10,000 = Rs. 24,000
Therefore, the correct answer is option D: Rs. 6,000, Rs. 24,000.
To calculate the loss on redemption of debentures in the fourth and fifth year, we need to consider the premium amount and the face value of the debentures.
Given:
- Number of debentures issued = 10,000
- Face value of each debenture = Rs. 10
- Premium on each debenture = 30%
Step 1: Calculate the Premium Amount
The premium on each debenture is 30% of the face value. So, the premium amount per debenture is:
Premium amount = 30/100 * Rs. 10 = Rs. 3
Step 2: Calculate the Total Premium Amount
To calculate the total premium amount, we multiply the premium amount per debenture by the number of debentures issued.
Total Premium Amount = Rs. 3 * 10,000 = Rs. 30,000
Step 3: Calculate the Redemption Value
The redemption value is the sum of the face value and the premium amount. In this case, since the debentures are redeemable in equal lots over 5 years, the redemption value will remain the same for each lot.
Redemption Value = Face Value + Premium Amount = Rs. 10 + Rs. 3 = Rs. 13
Step 4: Calculate the Loss on Redemption
The loss on redemption is the difference between the redemption value and the face value. In this case, since the debentures were issued at par, the face value is equal to the issue price.
Loss on Redemption = Redemption Value - Face Value = Rs. 13 - Rs. 10 = Rs. 3
Step 5: Allocate the Loss on Redemption
Since the debentures are redeemable in equal lots over 5 years, we need to allocate the loss on redemption over these years. The total loss on redemption is Rs. 3 for each debenture.
In the fourth year, 1/5th of the debentures will be redeemed. So, the loss on redemption in the fourth year will be:
Loss on Redemption in Fourth Year = Rs. 3 * (1/5) * 10,000 = Rs. 6,000
In the fifth year, the remaining 4/5th of the debentures will be redeemed. So, the loss on redemption in the fifth year will be:
Loss on Redemption in Fifth Year = Rs. 3 * (4/5) * 10,000 = Rs. 24,000
Therefore, the correct answer is option D: Rs. 6,000, Rs. 24,000.
Most Upvoted Answer
A Ltd. issued 10,000 12% Debentures of Rs. 10 each at par which are re...
Calculation of Premium on Redemption:
Issue price of 1 debenture = Rs. 10
Premium on 1 debenture = 30% of Rs. 10 = Rs. 3
Redemption price of 1 debenture = Rs. 10 + Rs. 3 = Rs. 13
Total issue price of 10,000 debentures = Rs. 10 x 10,000 = Rs. 1,00,000
Total premium on 10,000 debentures = Rs. 3 x 10,000 = Rs. 30,000
Total redemption price of 10,000 debentures = Rs. 13 x 10,000 = Rs. 1,30,000
Calculation of Loss on Redemption:
Redemption price of 1 debenture = Rs. 13
Issue price of 1 debenture = Rs. 10
Loss on redemption of 1 debenture = Rs. 13 - Rs. 10 = Rs. 3
Total loss on redemption of 10,000 debentures = Rs. 3 x 10,000 = Rs. 30,000
Allocation of Loss on Redemption:
The debentures are redeemable in equal lots over a period of 5 years. Therefore, the loss on redemption should be allocated equally over the 5 years.
Loss on redemption per year = Rs. 30,000 ÷ 5 = Rs. 6,000
In the fourth and fifth year, only 4,000 debentures will be redeemed as the remaining 2,000 debentures would have been redeemed in the first three years. Therefore, the loss on redemption to be written off in the fourth and fifth year will be:
Fourth year: 4,000 debentures x Rs. 3 = Rs. 12,000
Fifth year: 2,000 debentures x Rs. 3 = Rs. 6,000
Therefore, the correct answer is option D, i.e., Rs. 4,000 in the fourth year and Rs. 2,000 in the fifth year.
Issue price of 1 debenture = Rs. 10
Premium on 1 debenture = 30% of Rs. 10 = Rs. 3
Redemption price of 1 debenture = Rs. 10 + Rs. 3 = Rs. 13
Total issue price of 10,000 debentures = Rs. 10 x 10,000 = Rs. 1,00,000
Total premium on 10,000 debentures = Rs. 3 x 10,000 = Rs. 30,000
Total redemption price of 10,000 debentures = Rs. 13 x 10,000 = Rs. 1,30,000
Calculation of Loss on Redemption:
Redemption price of 1 debenture = Rs. 13
Issue price of 1 debenture = Rs. 10
Loss on redemption of 1 debenture = Rs. 13 - Rs. 10 = Rs. 3
Total loss on redemption of 10,000 debentures = Rs. 3 x 10,000 = Rs. 30,000
Allocation of Loss on Redemption:
The debentures are redeemable in equal lots over a period of 5 years. Therefore, the loss on redemption should be allocated equally over the 5 years.
Loss on redemption per year = Rs. 30,000 ÷ 5 = Rs. 6,000
In the fourth and fifth year, only 4,000 debentures will be redeemed as the remaining 2,000 debentures would have been redeemed in the first three years. Therefore, the loss on redemption to be written off in the fourth and fifth year will be:
Fourth year: 4,000 debentures x Rs. 3 = Rs. 12,000
Fifth year: 2,000 debentures x Rs. 3 = Rs. 6,000
Therefore, the correct answer is option D, i.e., Rs. 4,000 in the fourth year and Rs. 2,000 in the fifth year.
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A Ltd. issued 10,000 12% Debentures of Rs. 10 each at par which are re...
It will right of in the ratio 10:8:6:4:2
4th year 30000 multiply 4/30) . =4000
5th year 30000x2/30= 2000
4th year 30000 multiply 4/30) . =4000
5th year 30000x2/30= 2000
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A Ltd. issued 10,000 12% Debentures of Rs. 10 each at par which are redeemable at the end of each year in equal lots in 5 years at a premium of 30%. The amount of loss on redemption of debentures to be written off in fourth and fifth year will be:a)Rs. 10,000, Nilb)Rs. 4,000, 4000c)Rs. 4,000, 2000d)Rs. 6,000, 24000Correct answer is option 'D'. Can you explain this answer?
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A Ltd. issued 10,000 12% Debentures of Rs. 10 each at par which are redeemable at the end of each year in equal lots in 5 years at a premium of 30%. The amount of loss on redemption of debentures to be written off in fourth and fifth year will be:a)Rs. 10,000, Nilb)Rs. 4,000, 4000c)Rs. 4,000, 2000d)Rs. 6,000, 24000Correct answer is option 'D'. Can you explain this answer? for CA Foundation 2025 is part of CA Foundation preparation. The Question and answers have been prepared according to the CA Foundation exam syllabus. Information about A Ltd. issued 10,000 12% Debentures of Rs. 10 each at par which are redeemable at the end of each year in equal lots in 5 years at a premium of 30%. The amount of loss on redemption of debentures to be written off in fourth and fifth year will be:a)Rs. 10,000, Nilb)Rs. 4,000, 4000c)Rs. 4,000, 2000d)Rs. 6,000, 24000Correct answer is option 'D'. Can you explain this answer? covers all topics & solutions for CA Foundation 2025 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for A Ltd. issued 10,000 12% Debentures of Rs. 10 each at par which are redeemable at the end of each year in equal lots in 5 years at a premium of 30%. The amount of loss on redemption of debentures to be written off in fourth and fifth year will be:a)Rs. 10,000, Nilb)Rs. 4,000, 4000c)Rs. 4,000, 2000d)Rs. 6,000, 24000Correct answer is option 'D'. Can you explain this answer?.
A Ltd. issued 10,000 12% Debentures of Rs. 10 each at par which are redeemable at the end of each year in equal lots in 5 years at a premium of 30%. The amount of loss on redemption of debentures to be written off in fourth and fifth year will be:a)Rs. 10,000, Nilb)Rs. 4,000, 4000c)Rs. 4,000, 2000d)Rs. 6,000, 24000Correct answer is option 'D'. Can you explain this answer? for CA Foundation 2025 is part of CA Foundation preparation. The Question and answers have been prepared according to the CA Foundation exam syllabus. Information about A Ltd. issued 10,000 12% Debentures of Rs. 10 each at par which are redeemable at the end of each year in equal lots in 5 years at a premium of 30%. The amount of loss on redemption of debentures to be written off in fourth and fifth year will be:a)Rs. 10,000, Nilb)Rs. 4,000, 4000c)Rs. 4,000, 2000d)Rs. 6,000, 24000Correct answer is option 'D'. Can you explain this answer? covers all topics & solutions for CA Foundation 2025 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for A Ltd. issued 10,000 12% Debentures of Rs. 10 each at par which are redeemable at the end of each year in equal lots in 5 years at a premium of 30%. The amount of loss on redemption of debentures to be written off in fourth and fifth year will be:a)Rs. 10,000, Nilb)Rs. 4,000, 4000c)Rs. 4,000, 2000d)Rs. 6,000, 24000Correct answer is option 'D'. Can you explain this answer?.
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ample number of questions to practice A Ltd. issued 10,000 12% Debentures of Rs. 10 each at par which are redeemable at the end of each year in equal lots in 5 years at a premium of 30%. The amount of loss on redemption of debentures to be written off in fourth and fifth year will be:a)Rs. 10,000, Nilb)Rs. 4,000, 4000c)Rs. 4,000, 2000d)Rs. 6,000, 24000Correct answer is option 'D'. Can you explain this answer? tests, examples and also practice CA Foundation tests.
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