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Difficulty: EasyIssue and Redemption of Debentures

Kano Logistics Plc issued ₦100,000\text{₦}100,000, 8%8\% debentures at par on 1st January 2025. What is the total annual debenture interest payable by the company for the year ended 31st December 2025?

Answer: 8000 ₦

Answer

The total annual debenture interest payable for the year is ₦8,000.
Debenture interest is calculated by multiplying the nominal value of the debentures by the stated annual coupon interest rate (₦100,000×8%=₦8,000\text{₦}100,000 \times 8\% = \text{₦}8,000). Since the debentures were outstanding for the entire financial year, full year's interest of ₦8,000\text{₦}8,000 is payable.

Step-by-Step Solution

1
Determine the face (nominal) value of debentures and interest percentage rate.
Nominal value = ₦100,000\text{₦}100,000; Interest rate = 8%8\% per annum.
Debenture interest is calculated on the nominal value of debentures issued.
2
Compute the full annual interest payable.
Interest = ₦100,000×0.08=₦8,000\text{₦}100,000 \times 0.08 = \text{₦}8,000.
The debentures were held for the entire 12-month period from 1st January 2025 to 31st December 2025.

Key Concept

Calculation of debenture interest based on nominal value and coupon rate
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Topics

Issue and Redemption of Debentures

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