Based on following case, answer question.
A Ltd issued 2,000, 10% debenture of ₹100 each on April 1, 2019 at a discount of 10% redeemable at a premium of 10% after five years. Company purchased assets of the book value of ₹2,20,000 from B Ltd. at book value and agreed to make payment of purchase consideration by issuing another 2000, 10% Debentures of ₹100 each at a premium of 10% on above mentioned date only.
Calculate interest on Debenture for the year 2019-20 from the above-given information.
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → ₹40,000
Interest is paid on the face value of all debentures outstanding, whatever their issue price.
Debentures issued for cash at a discount = 2,000 × ₹100 = ₹2,00,000
Debentures issued to B Ltd. at a premium = 2,000 × ₹100 = ₹2,00,000
Total face value = ₹4,00,000
Interest for 2019-20 (1st April 2019 to 31st March 2020, full year) = ₹4,00,000 × 10/100 = ₹40,000