Question

Which of the following is true with regard to 10% Debentures issued at a discount of 20%?

Options

• The carrying amount of debentures gets reduced each year at a rate of 20%.

• Issue price and the carrying amount of debentures are equal.

• At the time of redemption, the debenture holder will be paid at the issue price.

• The face value and the carrying amount of debentures are equal.

Answer 1

The face value and the carrying amount of debentures are equal.

Explanation:

The face value and carrying amount of 10% debentures issued at a 20% discount are the same.