Question

On 1st May, 2023, Amrit Ltd. issued 10,000, 10\% debentures of \rupee 100 each at a premium of 10\% redeemable at a premium of 10\%. Loss on issue of debentures will be:

• A. \rupee 2,000
• B. \rupee 1,30,000
• C. \rupee 1,00,000
• D. \rupee 80,000

Hint:

To calculate the loss on issue of debentures, subtract the premium received at the time of issue from the premium payable at redemption and multiply by the total number of debentures.

Answer 1

The Correct Option is C

Step 1: Calculate the total proceeds from debentures:
Number of debentures issued = 10,000
Face value of each debenture = \rupee 100
Premium on issue = 10\% of \rupee 100 = \rupee 10
Proceeds per debenture = \rupee 100 + \rupee 10 = \rupee 110
Total proceeds: \[ 10,000 \times \rupee 110 = \rupee 11,00,000 \] Step 2: Calculate the total redemption amount:
Redemption premium = 10\% of \rupee 100 = \rupee 10
Redemption value per debenture = \rupee 100 + \rupee 10 = \rupee 110
Total redemption amount: \[ 10,000 \times \rupee 110 = \rupee 11,00,000 \] Step 3: Calculate the loss on issue of debentures:
The loss on issue arises due to the difference between the premium on redemption and the premium on issue: \[ \text{Loss on issue} = (\text{Redemption premium} - \text{Issue premium}) \times \text{Number of debentures} \] \[ \text{Loss on issue} = (\rupee 10 - \rupee 0) \times 10,000 = \rupee 1,00,000 \] Conclusion:
The loss on issue of debentures is \( \rupee 1,00,000 \).