Examkin

Issue and Redemption of Debentures

8 soru

Tüm türler8Çoktan seçmeli3Sayısal5
Soru 1Soru →

On 1st April 2025, Horizon Ltd issued ₦800,000\text{₦}800,000, 12%12\% debentures at a discount of 5%5\%. Interest is payable semi-annually on 30th September and 31st March. What is the total amount of debenture interest (in ₦\text{₦}) to be charged to the Profit and Loss Account for the financial year ended 31st December 2025?

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Cevap: 72000

Cevap

The total debenture interest to be charged to the Profit and Loss Account for the financial year ended 31st December 2025 is ₦72,000.
Debenture interest is computed at the stated annual rate of 12%12\% on the nominal value of ₦800,000\text{₦}800,000, resulting in an annual interest of ₦96,000\text{₦}96,000. Because the debentures were issued on 1st April 2025 and the financial year ends on 31st December 2025, interest accrued for only 9 months. The total interest charged to the Profit and Loss Account is ₦96,000×912=₦72,000\text{₦}96,000 \times \frac{9}{12} = \text{₦}72,000.

Adım Adım Çözüm

1
Calculate annual debenture interest on nominal value.
Annual interest = 12% of ₦800,000 = ₦96,000.
Debenture interest is calculated on nominal (par) value, regardless of whether debentures are issued at par, premium, or discount.
2
Determine the time period between debenture issue date and financial year-end.
From 1st April 2025 to 31st December 2025 is 9 months.
Interest expense must be recognized for the portion of the year the debentures were outstanding.
3
Calculate time-apportioned debenture interest expense.
₦96,000 × (9 / 12) = ₦72,000.
The Profit and Loss Account requires the exact accrued expense for the 9 active months of the accounting period.

Anahtar Kavram

Time Apportionment of Debenture Interest on Nominal Value
Soru 2Soru →

Apex Limited issued 2,000, 10% debentures of ₦100 each at a discount of 5% on 1st April 2024. If the company closes its accounting books on 31st December 2024, what is the amount of debenture interest to be charged to the Profit and Loss Account for the year?

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Cevap: ₦15,000

Cevap

The debenture interest to be charged to the Profit and Loss Account is ₦15,000.
Debenture interest is a fixed charge against profit and must be calculated on nominal value (2,000×₦100=₦200,0002,000 \times ₦100 = ₦200,000). For the 9-month period from 1st April to 31st December 2024, interest payable is ₦200,000×10%×912=₦15,000₦200,000 \times 10\% \times \frac{9}{12} = ₦15,000.

Adım Adım Çözüm

1
Calculate the total nominal (face) value of the debentures issued.
Total Nominal Value = 2,000×₦100=₦200,0002,000 \times ₦100 = ₦200,000
Debenture interest is always computed on nominal value, regardless of whether debentures are issued at par, premium, or discount.
2
Calculate the annual debenture interest.
Annual Interest = 10%×₦200,000=₦20,00010\% \times ₦200,000 = ₦20,000
The rate specified on debentures (10%) is an annual coupon rate.
3
Time-apportion interest for the period from issue date (1st April 2024) to year-end (31st December 2024).
Interest for 9 months = ₦20,000×912=₦15,000₦20,000 \times \frac{9}{12} = ₦15,000
The debentures were held for 9 months during the financial year.

Anahtar Kavram

Debenture Interest Calculation and Time Apportionment
Tahmini Süre:1m 30s
Soru 3Soru →

BlueWave Ltd issued 2,5002,500, 12%12\% debentures of ₦200\text{₦}200 each at par on 1st July 2024. Interest is payable semi-annually on 31st December and 30th June. What is the amount of debenture interest payable for the period ending 31st December 2024, in Naira (₦\text{₦})?

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Cevap: 30000

Cevap

The debenture interest payable for the period ending 31st December 2024 is ₦30,000.
The correct answer is obtained by calculating the total nominal value (2,500×₦200=₦500,0002,500 \times \text{₦}200 = \text{₦}500,000), finding the annual interest (12%×₦500,000=₦60,00012\% \times \text{₦}500,000 = \text{₦}60,000), and then apportioning it for 6 months (July to December), which equals ₦30,000.

Adım Adım Çözüm

1
Determine total nominal value of debentures
₦500,000
Multiply the total number of debentures issued by the nominal value per debenture (2,500×₦2002,500 \times \text{₦}200).
2
Calculate annual debenture interest
₦60,000
Apply the stated annual coupon rate of 12% to the total nominal value of ₦500,000.
3
Time-apportion interest for the 6-month period
₦30,000
Multiply the annual interest amount by 612\frac{6}{12} to account for the duration from 1st July to 31st December 2024.

Anahtar Kavram

Debenture Interest Time Apportionment
Soru 4Soru →

Vanguard Nigeria Plc issued ₦400,000\text{₦}400,000, 10%10\% debentures at a discount of 5%5\%. Which of the following journal entries correctly records this transaction?

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Cevap: Debit Bank Account ₦380,000\text{₦}380,000, Debit Discount on Issue of Debentures Account ₦20,000\text{₦}20,000; Credit 10%10\% Debentures Account ₦400,000\text{₦}400,000

Cevap

Debit Bank Account ₦380,000\text{₦}380,000, Debit Discount on Issue of Debentures Account ₦20,000\text{₦}20,000; Credit 10%10\% Debentures Account ₦400,000\text{₦}400,000
When debentures are issued at a discount, the cash received equals Nominal Value minus Discount (400,000−20,000=380,000400,000 - 20,000 = 380,000). The Bank Account is debited with 380,000380,000, Discount on Issue of Debentures is debited with 20,00020,000, and the 10%10\% Debentures Account is credited with the nominal value of 400,000400,000.

Adım Adım Çözüm

1
Calculate the amount of discount on issue
\text{Discount} = 5\% \times \text{₦}400,000 = \text{₦}20,000$
Discount is given as a percentage of the nominal value.
2
Calculate the net cash received in the bank
\text{Net Bank Proceeds} = \text{₦}400,000 - \text{₦}20,000 = \text{₦}380,000$
The company receives the nominal amount minus the discount allowed.
3
Formulate double entry postings
Debit Bank Account (₦380,000\text{₦}380,000), Debit Discount on Issue of Debentures (₦20,000\text{₦}20,000), Credit 10%10\% Debentures Account (₦400,000\text{₦}400,000)
Assets (Bank) increase on debit, losses/expenses (Discount) are debited, and liabilities (Debentures) increase on credit at full nominal value.

Anahtar Kavram

Accounting entries for the issue of debentures at a discount
Soru 5Soru →

Zenith Engineering Ltd issued 5,0005,000, 10%10\% debentures of ₦100\text{₦}100 each at a discount of 4%4\%. The terms of issue specify that the debentures are redeemable after five years at a premium of 5%5\%. What is the total loss on issue of debentures to be written off over the tenure of the debentures?

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Cevap: \text{₦}45,000

Cevap

\text{₦}45,000
The correct answer is \text{₦}45,000. When debentures are issued at a discount and redeemable at a premium, the total capital loss incurred by the issuing company equals the sum of the discount granted upon issue (\text{₦}20,000) and the premium promised upon redemption (\text{₦}25,000). Both components represent a cost of borrowing that must be recognized and written off over the tenure of the debentures.

Adım Adım Çözüm

1
Calculate the total nominal value of the debentures issued.
\text{Nominal Value} = 5,000 \times \text{₦}100 = \text{₦}500,000
The nominal value forms the base for calculating both the issue discount and the redemption premium.
2
Calculate the discount allowed on the issue of debentures.
\text{Discount on Issue} = 4\% \times \text{₦}500,000 = \text{₦}20,000
Issuing debentures below face value represents an immediate capital loss.
3
Calculate the premium payable on the redemption of debentures.
\text{Premium on Redemption} = 5\% \times \text{₦}500,000 = \text{₦}25,000
Agreeing to redeem debentures above face value creates an additional capital liability/loss at the date of issue.
4
Sum the discount on issue and premium on redemption to find the total loss on issue.
\text{Total Loss on Issue} = \text{₦}20,000 + \text{₦}25,000 = \text{₦}45,000
Both items are capital losses arising from the issue contract and must be amortized over the debentures' life.

Anahtar Kavram

Accounting for Issue of Debentures Redeemable at a Premium
Soru 6Soru →

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?

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Cevap: 8000

Cevap

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.

Adım Adım Çözüm

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.

Anahtar Kavram

Calculation of debenture interest based on nominal value and coupon rate
Soru 7Soru →

Oasis Beverages Plc issued 5,0005,000 units of 12%12\% debentures of ₦100\text{₦}100 each at a discount of 6%6\%, redeemable at a premium of 4%4\%. What is the total loss on issue of debentures (in naira) to be recognized in the books of the company?

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Cevap: 50000

Cevap

The total loss on issue of debentures to be recognized is ₦50,000.
When debentures are issued at a discount and redeemable at a premium, the overall loss on issue consists of both the issue discount (₦30,000) and the redemption premium (₦20,000). Adding these two components together gives a total loss of ₦50,000.

Adım Adım Çözüm

1
Calculate the nominal (face) value of the debentures issued
Nominal Value = 5,000×₦100=₦500,0005,000 \times \text{₦}100 = \text{₦}500,000
The nominal value represents the aggregate principal amount of the debentures.
2
Calculate the discount allowed on issue
Discount on Issue = 6%×₦500,000=₦30,0006\% \times \text{₦}500,000 = \text{₦}30,000
Issuing debentures at a 6%6\% discount means receiving ₦30,000\text{₦}30,000 less than nominal value.
3
Calculate the premium payable on redemption
Premium on Redemption = 4%×₦500,000=₦20,0004\% \times \text{₦}500,000 = \text{₦}20,000
Redeeming at a 4%4\% premium requires paying ₦20,000\text{₦}20,000 above nominal value at maturity.
4
Calculate the total loss on issue of debentures
Total Loss = Discount on Issue + Premium on Redemption = ₦30,000+₦20,000=₦50,000\text{₦}30,000 + \text{₦}20,000 = \text{₦}50,000
Both the discount granted at issue and the obligation to pay a premium on redemption constitute total capital losses arising from the debenture issue.

Anahtar Kavram

Accounting for loss on issue of debentures issued at a discount and redeemable at a premium.
Tahmini Süre:1m 30s
Soru 8Soru →

Lagos Marine Services Ltd resolved to redeem ₦300,000\text{₦}300,000 nominal value of its 12%12\% debentures at a premium of 6%6\%. What is the total cash amount paid to debenture holders upon redemption?

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Cevap: 318000

Cevap

The total cash amount paid to debenture holders upon redemption is ₦318,000.
When debentures are redeemed at a premium, the company pays debenture holders the nominal face value plus the agreed redemption premium percentage. Premium amount = 6% of ₦300,000 = ₦18,000. Total payment = ₦300,000 + ₦18,000 = ₦318,000.

Adım Adım Çözüm

1
Calculate the redemption premium amount
₦18,000
The premium on redemption is calculated as 6% of the nominal value (₦300,000).
2
Determine the total cash outflow for redemption
₦318,000
Total cash paid equals the nominal value plus the redemption premium.

Anahtar Kavram

Redemption of Debentures at a Premium
Issue and Redemption of Debentures Alıştırma Soruları — JAMB UTME | Examkin