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

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

Date	Particulars		L.F.	Amount (Rs.)	Amount (Rs.)
Jan,01 2011	Bank A/c	Dr.		5,00,000
	To Debentures A/c				5,00,000
	(5,000 debentures Issued @ Rs. 100 each)
31, Jan 2012	Profit and loss appropriation A/c	Dr.		1,60,174
	To Cumulative sinking fund A/c				1,60,174
	(Annual Instalment of Cumulative sinking fund debited by Profit and loss appropriation)
	Cumulative sinking fund Investment A/c			1,60,174
	To Bank A/c				1,60,174
	(Money Investment into Cumulative sinking fund A/c)
	Bank A/c	Dr.		6,407
	To Interest on Cumulative sinking fund A/c				6,407
	(Interest received @ 4% on Interest on Cumulative sinking fund)
	Interest on Cumulative sinking fund A/c	Dr.		6,407
	To Cumulative sinking fund A/c				6,407
	(Interest on Cumulative sinking fund A/c transferred to Cumulative sinking fund A/c)
	Profit and loss Appropriation A/c			1,60,174
	To Cumulative sinking fund A/c				1,60,174
	(Annual Instalment of Cumulative sinking fund A/c Debited to Profit and loss Appropriation A/c)
	Cumulative sinking fund Investment A/c			1,66,581
	To Bank A/c				1,66,581
	(Money Invested in Cumulative sinking fund Investment )
	Bank A/c	Dr.		13,070
	To Cumulative sinking fund Investment A/c				13,070
	(Interest received @4%)
	Cumulative sinking fund Investment A/c			13,070
	To Cumulative sinking fund A/c				13,070
	(Interest on Cumulative sinking fund A/c transferred to Cumulative sinking fund A/c)
	Profit and loss Appropriation A/c			1,60,174
	To Cumulative sinking fund A/c				1,60,174
	( Cumulative sinking fund debited to Profit and loss Appropriation A/c)
	Bank A/c			3,25,000
	To Cumulative sinking fund Investment A/c				3,25,000
	(Cumulative sinking fund Investment sold)
	Cumulative sinking fund A/c			1,755
	To Cumulative sinking fund Investment A/c				1,755
	(Loss on sale of Cumulative sinking fund Investment to Cumulative sinking fund A/c)
	Debenture A/c			5,00,000
	To Debenture holders A/c				5,00,000
	(Money due on Debenture holders)
	Debenture holders A/c			5,00,000
	To Bank A/c				5,00,000
	(Debenture paid to Debenture holders)
	Cumulative sinking fund A/c
	To General Reserve A/c			4,89,245
	(Credit balance of Cumulative sinking fund to General Reserve A/c)				4,89,245

Chapter-2 Issue and Redemption of Debentures-II

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