Read the following information and answer the question.
ABC Ltd. issued 20,000, 6% debentures of ₹100 each at a discount of 4% redeemable at a premium of 5% after 3 years from 1st April 2017. The amount payable on the application is ₹50 and the balance on the allotment. The company has a balance of ₹50,000 in securities premium reserve.
What is the amount of interest on debentures to be paid by the company annually?
Answer & explanation
Correct answer: option 2
The correct answer is option 2- ₹1,20,000.
Face value of debentures = ₹100
No of debentures = 20,000
Interest is 6%
Total interest paid = 20,000 x 100 x 6/100
= 20,00,000 x 6/100
= ₹1,20,000