Question

1) On 1 January 2012, Jetty Ltd receives £6,684,000 on the issue of 8% debentures with a nominal value of £8,000,000. The debentures are redeemable at the end of 2017 at par. Show in tabular form how the debentures should be recorded in the financial statements of Jetty Ltd from 2012 to 2017.

Answer 1

Face value of Debentures	£ 8,000,000.00
Amount received	£ 6,684,000.00
Discount on Issue of Bonds	£ 1,316,000.00
Period of Debentures	6 years

Sl. No.	Date	Credit Balance in Debentures	Debit Balance in Bond Discount	Amortised Discount	Interest Amount for the period	Interest Expense to be recognised	Book value of Bond on ending date
a.	31 December, 2012	£ 8,000,000.00	£        1,316,000.00	£ 219,333.33	£ 640,000.00	£ 859,333.33	£ 6,684,000.00
b.	31 December, 2013	£ 8,000,000.00	£        1,096,666.67	£ 219,333.33	£ 640,000.00	£ 859,333.33	£ 6,903,333.33
c.	31 December, 2014	£ 8,000,000.00	£          877,333.33	£ 219,333.33	£ 640,000.00	£ 859,333.33	£ 7,122,666.67
d.	31 December, 2015	£ 8,000,000.00	£          658,000.00	£ 219,333.33	£ 640,000.00	£ 859,333.33	£ 7,342,000.00
e.	31 December, 2016	£ 8,000,000.00	£          438,666.67	£ 219,333.33	£ 640,000.00	£ 859,333.33	£ 7,561,333.33
f.	31 December, 2017	£ 8,000,000.00	£          219,333.33	£ 219,333.33	£ 640,000.00	£ 859,333.33	£ 8,000,000.00