Based on following case, answer question :
A Ltd. issued 2,000, 10% Debentures 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 2,000, 10% Debentures of ₹100 each at a premium of 10% on the above-mentioned date only.
Debentures can be redeemed in which of the following ways?
Answer & explanation
Correct answer: option 4
The correct answer is Option (4) → All of these
Redemption of debentures means repaying the debenture liability according to the terms of issue. The book names four ways of doing it: payment in lump sum, payment in instalments, purchase in the open market, and conversion into shares or new debentures. Each of Options (1) to (3) is one of these ways, so all of them apply.
Option (1) Payments in installments — Correct. The debenture liability is repaid in parts on specified dates during the life of the debentures.
Option (2) Purchase in open market — Correct. The company buys its own debentures from the market and cancels them, often when they are quoted below par.
Option (3) Conversion into shares — Correct. Debentureholders may accept shares (or new debentures) in place of repayment in cash.
NCERT (2026-27 edition):
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