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JAMB Principles of Accounts 1997 Question 42

Question 42

Company Accounts

A company has 5% debentures worth ₦500 000, ordinary share capital ₦2 000 000, and preference shares ₦1 500 000. If the company made a profit of ₦1 000 000, the debenture interest would amount to

  1. A.₦1 000 000
  2. B.₦500 000
  3. C.₦50 000
  4. D.₦25 000.
Show the answer and explanation

Answer: D (₦25 000.)

Explanation

Debenture interest = 5% × 500 000 = ₦25 000, whatever the profit.