Question

A company issued debentures of the face value of Rs. 5,00,000 at a discount of 6% on January 01, 2011. These debentures are redeemable by annual drawings of Rs. 1,00,000 made on December 31 each year. The directors decided to write-off discount based on the debentures outstanding each year. Calculate the amount of discount to be written- off each year. Give journal entries also.

Answer 1

Amount of discount of issue of Debenture = 50,000 x 100 x \(\frac{6}{100}\) = 30,000.