A company issued debentures of Rs. 60,000 at discount of Rs. 3,000 on 1st April 1996. they are repayable in 3 equal instalments each on 31st March, every year. The financial year of the company ends on 31st December every year. How much discount will be written off in the second year: A. Rs. 1,000 B. Rs. 625 C. Rs. 1,500 D. Rs. 1,125

The correct answer is B. Rs. 625.

The discount on debentures is written off in equal installments over the period of the loan. In this case, the loan is for 3 years, so the discount will be written off in 3 equal installments. The amount of discount written off each year is equal to the discount divided by the number of years of the loan. In this case, the amount of discount written off each year is equal to Rs. 3,000 / 3 = Rs. 1,000.

However, the financial year of the company ends on 31st December every year. This means that the first year of the loan is from 1st April 1996 to 31st December 1996, the second year of the loan is from 1st January 1997 to 31st December 1997, and the third year of the loan is from 1st January 1998 to 31st March 1998.

In the second year of the loan, only 9 months have passed. Therefore, the amount of discount written off in the second year is equal to Rs. 1,000 x 9 / 12 = Rs. 625.