Question

Ankur Jewellery Ltd. issued 50,00,000, $8\%$ Debentures of Rs 100 each at a discount of $6\%$ on April 1 , 2012 redeemable at premium of $4\%$ by draw of lots as under:

20,00,000 Debentures on March 31,2015

10,00,000 Debentures on March 31,2016

20,00,000 Debentures on March 31,2017

Compute the amount of discount to be written off in each year till debentures are paid. Also prepare discount /loss on issue of debentures account.

Answer 1

$\begin{array}{ccc}\text{Discount on issue}=& \text{Rs 50 Crores}\times \frac{6}{100}& =\text{Rs 3 Crores}\\ \text{Premium on Redemption}=& \text{Rs 50 Crores}\times \frac{4}{100}& =\text{Rs 2 Crores}\\ \text{Total Loss on Issue of Debentures}& & =\text{Rs}\overline{\underset{–}{5}}\text{Crores}\end{array}$

The loss on issue of debentures will be written off from Statement of P and L in the following manner:
(Rs in Crores)
$\begin{array}{cccc}& \text{Debentures}& & \text{Amount of Loss on Issue to be}\\ \text{Year ending}& \text{Outstanding}& \text{Ratio *}& \text{written off to Statement P and L}\\ & \text{Rs}& & \text{Rs}\\ \text{March 31, 2013}& 50& 5& \frac{5}{20}\times \text{Rs}5=1.25\\ \text{March 31, 2014}& 50& 5& \frac{5}{20}\times \text{Rs}5=1.25\\ \text{March 31,2015}& 50& 5& \frac{5}{20}\times \text{Rs}5=1.25\\ \text{March 31,2016}& 30& 3& \frac{3}{20}\times \text{Rs}5=0.75\\ \text{March 31, 2017}& 20& 2& \frac{2}{20}\times \text{Rs}5=0.5\\ & & \overline{\underset{–}{\underset{–}{20}}}& \overline{\underset{–}{\underset{–}{5}}}\end{array}$

*Ratio has been obtained by dividing the debentures outstanding by 10.

$\begin{array}{cccccccc}\text{Dr}& & & & \text{LOSS ON ISSUE OF DEBENTURES A/C}& & \text{Cr}& \\ & & & & & & \text{Rs in Crores}& \end{array}\begin{array}{cccccc}\text{Date}& \text{Particulars}& \text{Rs}& \text{Date}& \text{Particulars}& \text{Rs}\\ 2012& & & 2013& & \\ \text{April 1}& \text{To}8\%\text{Debentures A/c}& & \text{March 31}& \text{By Statement of}& \\ & \left(6\%\text{Discount on}\right)& & & \text{Profit and Loss}& 1.25\\ & \text{50 Crores)}& 3& \text{March 31}& \text{By Balance c/f}& 3.75\\ \text{April 1}& \text{To Premium on}& & & & \\ & \text{Redemption of}& & & & \\ & \text{Debentures A/c}& & & & \\ & (4\%\text{on 50 Crores)}& 2& & & \\ & & \overline{\underset{–}{\underset{–}{5}}}& & & \overline{\underset{–}{\underset{–}{5}}}\\ 2013& & & 2014& & \\ \text{April 1}& \text{To Balance b/f}& 3.75& \text{March 31}& \text{By Statement of}& \\ & & & & \text{Profit and Loss}& 1.25\\ & & & \text{March 31}& \text{By Balance c/f}& 2.5\\ & & \overline{\underset{–}{\underset{–}{3.75}}}& & & \overline{\underset{–}{\underset{–}{3.75}}}\\ 2014& & & 2015& & \\ \text{April 1}& \text{To Balance b/f}& 2.5& \text{March 31}& \text{By Statement of}& \\ & & & & \text{Profit and Loss}& 1.25\\ & & & \text{March 31}& \text{By Balance c/f}& 1.25\\ & & \overline{\underset{–}{\underset{–}{2.5}}}& & & \overline{\underset{–}{\underset{–}{2.5}}}\\ 2015& & & 2016& & \\ \text{April 1}& \text{To Balance b/f}& 1.25& \text{March 31}& \text{By Statement of}& \\ & & & & \text{Profit and Loss}& 0.75\\ & & & \text{March 31}& \text{By Balance c/f}& 0.5\\ & & \overline{\underset{–}{\underset{–}{1.25}}}& & & \overline{\underset{–}{\underset{–}{1.25}}}\\ 2016& & & 2017& & \\ \text{April 1}& \text{To Balance b/f}& 0.5& \text{March 31}& \text{By Statement of}& \\ & & & & \text{Profit and Loss}& 0.5\\ & & \overline{\underset{–}{\underset{–}{0.5}}}& & & \overline{\underset{–}{\underset{–}{0.5}}}\end{array}$