Hemant Ltd. issued 10000 12% debentures of 100 ruppes each at 94 ruppe...
4000(debentures outstanding in 2017) *60000(total discount) / 30000 (sum of debentures outstanding)
Hemant Ltd. issued 10000 12% debentures of 100 ruppes each at 94 ruppe...
Hemant Ltd. - Debenture Redemption
Background Information:
- Hemant Ltd. issued 10,000 debentures of 100 rupees each at 94 rupees on January 1, 2014.
- The debentures carry an interest rate of 12%.
- According to the terms of the issue, 1/5th of the debentures are to be redeemed annually.
Calculation of Debentures Redeemed:
- Total debentures issued: 10,000
- Redemption rate: 1/5
- Number of debentures to be redeemed annually: 10,000 * 1/5 = 2,000
Calculation of Discount:
- Discount on issue: 100 - 94 = 6 rupees per debenture
- Total discount on issue: 6 * 10,000 = 60,000 rupees
- Discount to be written off annually: Total discount / Number of years = 60,000 / (Total number of years until now - 1)
Calculation of Number of Years:
- The first redemption occurred on December 31, 2014.
- We need to calculate the number of years from 2014 until 2017.
- Number of years = 2017 - 2014 = 3 years
Calculation of Discount to be Written Off in 2017:
- Discount to be written off annually: 60,000 / (3 - 1) = 60,000 / 2 = 30,000 rupees
Answer:
The discount to be written off in 2017 is 30,000 rupees.
Explanation:
- Hemant Ltd. issued debentures at a discount, which means that the debentures were sold at a price lower than their face value.
- The discount on issue is calculated by subtracting the issue price from the face value of each debenture.
- In this case, the discount on issue is 6 rupees per debenture.
- The total discount on issue is the discount per debenture multiplied by the number of debentures issued.
- The discount to be written off annually is the total discount on issue divided by the number of years until now minus 1.
- In this case, the first redemption occurred in 2014, and we need to calculate the discount to be written off in 2017.
- The number of years from 2014 until 2017 is 3 years.
- Therefore, the discount to be written off in 2017 is 30,000 rupees.
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