X Ltd issues $500, 15 %$ Debentures of Rs $100$ each on $1 s t$ May at a discount of $10 %$ redeemable at a premium of $5 %$ after $4$ years. Interest was payable half yearly on $30 t h$ June and $31 s t$ December. The amount of interest debited to profit & Loss Account for the year ended $31 s t$ March is-

1, 250

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3, 750

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5, 000

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6, 875

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Solution

The correct option is D Rs $6, 875$
Total amount of debentures = 500100 = Rs. 50,000
Interest at 15% for full year = Rs. 7500
Debentures issued on 1st May. So interest for 11 month from 1st May to 31st March will be debited.
Interest for 11 Months = 7500/1211 = Rs.6875

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