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Equityandliabilities 31-3-2019(₹) 31-3-2020(₹)10%Debentures 2,00,000 1,60,000AdditionalInformation:Interest on debentures is paid on half yearly basis on 30th September and 31st March eachyear.Debentures were redeemed on 30th September,2019. How much amount (relatedtoaboveinformation)willbeshowninFinancing ActivityforCashFlowStatementpreparedon31stMarch, 2020?(a) Outflow₹40,000.(b) Inflow ₹ 42,000.(c) Outflow₹58,000.(d) Outflow₹64,000

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Equityandliabilities 31-3-2019(₹) 31-3-2020(₹)10%Debentures 2,00,000 1,60,000AdditionalInformation:Interest on debentures is paid on half yearly basis on 30th September and 31st March eachyear.Debentures were redeemed on 30th September,2019. How much amount (relatedtoaboveinformation)willbeshowninFinancing ActivityforCashFlowStatementpreparedon31stMarch, 2020?(a) Outflow₹40,000.(b) Inflow ₹ 42,000.(c) Outflow₹58,000.(d) Outflow₹64,000

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Solution

The cash flow statement reflects the inflow and outflow of cash in a company. In this case, we are looking at the financing activity related to the redemption of debentures.

  1. The debentures were worth ₹2,00,000 on 31-3-2019 and ₹1,60,000 on 31-3-2020. This means that ₹40,000 worth of debentures were redeemed during the year.

  2. The interest on these debentures is paid on a half-yearly basis. Since the debentures were redeemed on 30th September 2019, interest would have been paid twice in the financial year - once on 30th September 2019 and once on 31st March 2020.

  3. The interest payment is 10% of the debenture value. So, for the first half of the year (April 2019 to September 2019), the interest payment would be 10% of ₹2,00,000, which is ₹20,000.

  4. For the second half of the year (October 2019 to March 2020), the interest payment would be 10% of the remaining debenture value, which is ₹1,60,000. So, the interest payment would be ₹16,000.

  5. Adding the redemption value and the interest payments, the total outflow related to the debentures in the financial year would be ₹40,000 (redemption) + ₹20,000 (first half-year interest) + ₹16,000 (second half-year interest) = ₹76,000.

However, none of the options provided match this calculation. It's possible there may be a mistake in the question or the provided options.

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