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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 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?
Most Upvoted Answer
W Ltd. issued 20,000, 8% debentures of Rs. 10 each at par, which are r...
Calculation of Premium on Redemption:
Face Value of Debenture = Rs. 10
Number of Debentures = 20,000
Total Face Value = 10 x 20,000 = Rs. 2,00,000
Premium on Redemption = 20% of Total Face Value = 20% of Rs. 2,00,000 = Rs. 40,000

Calculation of Loss on Redemption:
Redemption Amount = Face Value + Premium = Rs. 10 + Rs. 2 = Rs. 12
Number of Debentures = 20,000
Total Redemption Amount = Rs. 12 x 20,000 = Rs. 2,40,000
Total Amount Received from Issue of Debentures = Face Value x Number of Debentures = Rs. 10 x 20,000 = Rs. 2,00,000
Loss on Redemption = Total Redemption Amount - Total Amount Received from Issue of Debentures = Rs. 2,40,000 - Rs. 2,00,000 = Rs. 40,000

Annual Loss on Redemption:
Loss on Redemption = Rs. 40,000
Number of Years to Redemption = 5
Annual Loss on Redemption = Loss on Redemption / Number of Years to Redemption = Rs. 40,000 / 5 = Rs. 8,000

Therefore, the amount of loss on redemption of debentures to be written off every year will be Rs. 8,000.
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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 will bea)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 will bea)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 off every year will bea)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 off every year will bea)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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