On April 01, 2012, X. Ltd. Issues 5,000, 8% Debentures of Rs.100 Each Repayable at Par At the End of Three Years. It has been Decided to Set Up a Cumulative Sinking Fund For the Purpose of Their Redemption-SOLUTION

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On April 01, 2012, X. Ltd. issues 5,000, 8% Debentures of Rs.100 each repayable at par at the end of three years. It has been decided to set up a cumulative sinking fund for the purpose of their redemption. The investments are expected to realise 4% net. The Sinking Fund Table shows that Rs.0.320348 amounts to one rupee @4% per annum in three years. On December 31, 2000 the balance at bank was Rs.2,42,360 and the investments realised Rs.3,25,000. The debentures were paid off. Give journal entries .





Books of X.Ltd
Journal

DateParticularsL.F.
Amount
(Rs.)
Amount
(Rs.)
Jan,01 2011Bank A/cDr.5,00,000
To Debentures A/c5,00,000
(5,000 debentures Issued @ Rs. 100 each)
31, Jan 2012Profit and loss appropriation A/cDr.1,60,174
To Cumulative sinking fund A/c1,60,174
(Annual Instalment of Cumulative sinking fund debited by Profit and loss appropriation)
Cumulative sinking fund Investment A/c1,60,174
To Bank A/c1,60,174
(Money Investment into Cumulative sinking fund A/c)
Bank A/cDr.6,407
To Interest on Cumulative sinking fund A/c6,407
(Interest received @ 4% on Interest on Cumulative sinking fund)
Interest on Cumulative sinking fund A/cDr.6,407
To Cumulative sinking fund A/c6,407
(Interest on Cumulative sinking fund A/c transferred to Cumulative sinking fund A/c)
Profit and loss Appropriation A/c1,60,174
To Cumulative sinking fund A/c1,60,174
(Annual Instalment of Cumulative sinking fund A/c Debited to Profit and loss Appropriation A/c)
Cumulative sinking fund Investment A/c1,66,581
To Bank A/c1,66,581
(Money Invested in Cumulative sinking fund Investment )
Bank A/cDr.13,070
To Cumulative sinking fund Investment A/c13,070
(Interest received @4%)
Cumulative sinking fund Investment A/c13,070
To Cumulative sinking fund A/c13,070
(Interest on Cumulative sinking fund A/c transferred to Cumulative sinking fund A/c)
Profit and loss Appropriation A/c1,60,174
To Cumulative sinking fund A/c1,60,174
( Cumulative sinking fund debited to Profit and loss Appropriation A/c)
Bank A/c3,25,000
To Cumulative sinking fund Investment A/c3,25,000
(Cumulative sinking fund Investment sold)
Cumulative sinking fund A/c1,755
To Cumulative sinking fund Investment A/c1,755
(Loss on sale of Cumulative sinking fund Investment to Cumulative sinking fund A/c)
Debenture A/c5,00,000
To Debenture holders A/c5,00,000
(Money due on Debenture holders)
Debenture holders A/c5,00,000
To Bank A/c5,00,000
(Debenture paid to Debenture holders)
Cumulative sinking fund A/c
To General Reserve A/c4,89,245
(Credit balance of Cumulative sinking fund to General Reserve A/c)4,89,245

Chapter-2 Issue and Redemption of Debentures-II



Location: India

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