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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 off every year = ?
  • 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?
Most Upvoted Answer
W Ltd. issued 20,000, 8% debentures of Rs.10 each at par, which are re...
Calculation of loss on redemption of debentures

Total amount of debentures issued = 20,000 x Rs.10 = Rs.2,00,000
Premium on redemption = 20% of Rs.2,00,000 = Rs.40,000
Redemption value of each debenture = Rs.10 + Rs.2 = Rs.12

Total amount to be paid on redemption of all debentures = 20,000 x Rs.12 = Rs.2,40,000

Loss on redemption of debentures = Total amount to be paid - Total amount raised
= Rs.2,40,000 - Rs.2,00,000
= Rs.40,000

Calculation of amount of loss to be written off every year

As the debentures are redeemable after 5 years, the loss on redemption of debentures should be written off over the period of 5 years.

Amount of loss to be written off every year = Total loss on redemption of debentures / Number of years
= Rs.40,000 / 5
= Rs.8,000

Therefore, the amount of loss on redemption of debentures to be written off every year is Rs.8,000.
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Community Answer
W Ltd. issued 20,000, 8% debentures of Rs.10 each at par, which are re...
The amount of premium is 20% on Rs.10. therefore the debentures are redeemable at Rs.2 premium.
so, loss on redemption of debentures is Rs.40,000 now and as the debentures are redeemable after 5 years, the loss to be written off every year = 40,000/5 = Rs.8,000.
Hence, the correct answer is option (d)
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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 off every year = ?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 off every year = ?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 2025 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 off every year = ?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 2025 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 off every year = ?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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