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Shruthi (Querist)
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16 July 2012 Z ltd purchased an asset for 5 lac by issuing debenture of Rs 100 each @ discount of 20%.Wat is the amount to be credited to debenture a/c.and its journal entry

Sanjay Chauhan (IFRS)

Sanjay Chauhan (IFRS) (Expert)
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16 July 2012 Asset Dr. 4 lacs
Discount on issue of Deb Dr. 1 lac
To Debentures Cr. 5 lacs

Then follow regular entries of depreciation for FA and amortise the discount over the term of debentures.

CA ARIHANT JAIN

CA ARIHANT JAIN (Expert)
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16 July 2012 ASSET DR. -500000
DIS. ON ISSUE OF DEB. DR-125000
TO DEBENTURE 625000

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Sanjay Chauhan (IFRS)

Sanjay Chauhan (IFRS) (Expert)
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16 July 2012 If the debentures are issued at 20% discount, then its present value is 4 lacs.

It means that it is a longer duartion credit transaction and the discount refers to the interest to be paid.

My understanding of the problem reads that at the end, the company will pay only 5 lacs and not 6.25 lacs.

If not, then it may warrant additional information.

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