On Jan 1 20X1 Q Ltd had issued 500 debentures at a face amount of $5 000 each, 10% interest payable annually in arrears.There was a premium on issue of $750 per debenture.These debentures were publicly tradable after initial issue.The terms of issue state that the debentures can be bought back directly from the holder upon payment by Q Ltd of a premium of $400 per debenture and accrued interest.On July 1 20X6 Q Ltd bought back 100 of the debentures via the open market (Australian Securities Exchange) where the market price was steady at $4 300.
-This buyback transaction involves which of the following amounts?

Question

Quizplus · Accepted Answer

The debentures were bought back at a market price of $4,300, which is below the face value of $5,000, resulting in a discount on redemption of $70,000 (100 debentures x ($5,000 - $4,300)).

On Jan 1 20X1 Q Ltd Had Issued 500 Debentures