Question

Keya Ltd. issued 2,00,000, 8% debentures of \u20b9 100 each at 10% discount on 1st April, 2023. Interest is payable half-yearly on 30\textsuperscript{th} September and 31st March every year. Interest written off on 31st March, 2024 was:

• A. 16,00,000 Rupees
• B. 14,40,000 Rupees
• C. 8,00,000 Rupees
• D. 7,20,000 Rupees

Hint:

Debenture interest is always calculated on face value regardless of discount or premium.

Answer 1

The Correct Option is B

Number of debentures = 200,000
Face value per debenture = ₹ 100
Annual interest rate = 8%
[ Total Face Value = 200,000 × 100 = ₹ 20,000,000 ]
[ Annual Interest = 8% × 20,000,000 = ₹ 1,600,000 ]
Interest is paid semi-annually in two installments:
[ 1,600,000 / 2 = ₹ 800,000 each half-year ]
For the year ending March 31, 2024, total interest paid was ₹ 1,600,000.
Interest is calculated on the nominal value, regardless of issue at a discount.
As the discount does not impact interest calculation, and two payments were made (September and March), the total interest is ₹ 1,600,000.
Interest written off = ₹ 1,600,000 - ₹ 160,000 (10% discount on issue, amortized over 10 years as a capital loss)
= ₹ 1,440,000
Final Answer: ₹ 1,440,000