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Question

# X Ltd issues 500,15% Debentures of Rs100 each on 1st May at a discount of 10% redeemable at a premium of 5% after 4 years. Interest was payable half yearly on 30th June and 31st December. The amount of interest debited to profit & Loss Account for the year ended 31st March is-

A
Rs1,250
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B
Rs3,750
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C
Rs5,000
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D
Rs6,875
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Solution

## The correct option is D Rs6,875Total amount of debentures = 500*100 = Rs. 50,000Interest at 15% for full year = Rs. 7500Debentures issued on 1st May. So interest for 11 month from 1st May to 31st March will be debited. Interest for 11 Months = 7500/12*11 = Rs.6875

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