(b) Pure Ltd. issues 1,00,000 12% Debentures of Rs. 10 each at Rs. 9.40 on 1st January, 2018. Under the terms of issue, the Debentures are redeemable at the end of 5 years from the date of issue. Calculate the amount of discount to be written-off in each of the 5 years.
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Total amount of discount comes to Rs. 60,000(Rs. 0.6×1,00,000). The amount of discount to be written-off in each year is calculated as under.
Year end Debentures Ratio in which discount to be written-off Amount of discount to be written-off
1st Rs. 10,00,000 1/5 1/5th of Rs. 60,000=Rs. 12,000
2nd Rs. 10,00,000 1/5 1/5th of Rs. 60,000=Rs. 12,000
3rd Rs. 10,00,000 1/5 1/5th of Rs. 60,000=Rs. 12,000
4th Rs. 10,00,000 1/5 1/5th of 60,000=Rs. 12,000
5th Rs. 10,00,000 1/5 1/5th of Rs. 60,000=Rs. 12,000
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