debentures


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Querist : Anonymous (Querist)
18 December 2010 Dear Sir/Madam

X Ltd. 10% debentues of Rs.20,00,000 at 8% discount redeemable at par . Assume that the debentures areredeemable by drawing method in the following manner:
YEAR END FACE VALUE (Rs.)
2 2,00,000
3 4,00,000
4 6,00,000
5 8,00,000
thediscount on issue of debentures will be written off in the 1st and 2nd year as

(a) Rs.40,000 , Rs.40,000
(b) Rs.40,000 , Rs.36,000
(c) Rs.36,000 , Rs.28,000
(d) Rs.28,000 , Rs.16,000

Ans:(a)Rs.40,000 , Rs.40,000

Please tell how to calculate?


18 December 2010 Dear Friend
Total discount on debenture will be 1,60,000 that need to write off in the ratio of value of debenture shows in the books of account
As the redemption f debenture starts at the end of second year , so at the end of first year and second year value of debenture in the book of account are same .
for the writing of the discount of debenture following ration will be used
20:20:18:14:8 or 10:10:9:7:4
coz debenture are redeemed at the end of year so for that year interest will be charged for the full year
]Thanks


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