Which of the following combinations for the issue and redemption of debentures is not practically possible or permissible in general accounting?
- AIssued at a premium, Redeemed at a premium
- BIssued at a discount, Redeemed at a discount
- CIssued at par, Redeemed at a premium
- DIssued at a discount, Redeemed at par
Solution & Step-by-step Explanation
Let's look at the financial logic behind debenture terms:\begin{itemize}\item Companies can issue debentures at par, premium, or discount depending on market conditions, and they can redeem them at a premium as an extra incentive for investors.\item However, \textbf{Redemption at a discount} implies that the company will pay back less than the nominal face value at maturity. This is practically impossible because investors would not accept a contract that guarantees a loss at redemption.\end{itemize}