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    Question

    Company issues 5-year debentures ₹1,00,00,000 at par.

    Issue expenses ₹2,00,000. If company chooses to amortise issue expenses over life of debentures, annual amortisation is:
    A ₹40,000 Correct Answer Incorrect Answer
    B ₹20,000 Correct Answer Incorrect Answer
    C ₹2,00,000 in first year only Correct Answer Incorrect Answer
    D ₹1,00,000 Correct Answer Incorrect Answer

    Solution

    Annual Amortisation = Total Issue Expenses / Term of Debentures = 2,00,000 / 5 = ₹40,000.

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