B. Ltd. Issued Debentures at 94% for Rs 4,00,000 on April 01, 2011 Repayable by Five Equal Drawings of Rs 80,000 Each-Solution

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B. Ltd. issued debentures at 94% for Rs 4,00,000 on April 01, 2011 repayable by five equal drawings of Rs 80,000 each. The company prepares its final accounts on March 31 every year.

Indicate the amount of discount to be written-off every accounting year assuming that the company decides to write-off the debentures discount during the life of debentures. (Amount to be written-off: 2012 Rs 8,000; 2013 Rs 6,400; 2014 Rs 4,800; 2015 Rs 2,000; 2016 Rs 1,600).






Amount of discount to written off every year

In 2011 = Rs 6,000

In 2012 = 2,000 + 4,800 = Rs 6,800

In 2013 = 1,600 + 3,600 = Rs 5,200

In 2014 = 1,200 + 2,400 = Rs 3,600

In 2015 = 800 + 1,200 = Rs 2,000

In 2016 = Rs 400

Working Notes

i) Amount of discount to be written off every year

YearDebentures OutstandingRatioMonthsNew Ratio (Ratio × Months)Amounts written off
2012     
Apr-Mar3,20,0005126024,000×60180=8,000
2013     
Apr-Mar2,40,0004124824,000×48180=6,400
2014     
Apr-Mar1,60,0003123624,000×36180=4,800
2015     
Apr-Mar80,0002122424,000×24180=3,200
2016     
Apr-Mar80,0001121224,000×12180=1,600
    180 

Chapter-2 Issue and Redemption of Debentures-II



Location: India

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