Question 21 Chapter 10 of +2-Part-1 - USHA Publication 12 Class Part - 1

Question 21 Chapter 10 of +2-Part-1

21. (Ledger Accounts/Sinking Fund/Sinking Fund Investment) X and Co. Ltd. issued 1.000 6% debentures of Rs. 100 each repayable at the end of 5 years. It was resolved to establish a Sinking Fund for the purpose. Show the ledger accounts for the five years, assuming that interest received on the investments representing the Sinking Fund was at the rate of 5 percent on the cost, that the interest was received yearly and immediately invested (ignore income tax) and that the sale proceeds of the investments to repay the debentures realised 96 per cent.
Referring to the table shows that Re. 0.180975 invested at the end of each year at 5 per cent compound interest will produce Re. 1 at the end of five years.
Show relevant ledger account

The solution of Question 21 Chapter 10 of +2 Part-1:-

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9% Debentures Account

Date	Particulars	₹	Date	Particulars	₹
1st	To Balance c/d	1,00,000	1st	By Debenture App. & All. A/c	1,00,000
		1,00,000			1,00,000
2nd	To Balance c/d	1,00,000	2nd	By Balance b/d	1,00,000
		1,00,000			1,00,000
3rd	To Bank A/c	1,00,000	3rd	By Balance b/d	1,00,000
		1,00,000			1,00,000
4th	To Balance c/d	1,00,000	4th	By Balance b/d	1,00,000
		1,00,000			1,00,000
5th	To Debentures holders A/c	1,00,000	5th	By Balance b/d	1,00,000
		1,00,000			1,00,000

Debentures Sinking Fund Account

Date	Particulars	₹	Date	Particulars	₹
1st	To Balance c/d	18,097.50		By Statement Profit & loss	18,097.50
		18,097.50			18,097.50
2nd	To Balance c/d	37,099.87	2nd	By Balance b/d	18,097.50
				By Interest on S.F. Investment A/c	904.87
				By Statement Profit & loss	18,097.50
		37,099.87			37,099.87
3rd	To Balance c/d	57,052.37	3rd	By Balance b/d	37,099.87
				By Interest on S.F. Investment A/c	1855.0
				By Statement Profit & loss	18,097.50
		57,052.37			57,052.37
4th	To Balance c/d	78,002.76	4th	By Balance b/d	57,052.37
				By Interest on S.F. Investment A/c	2,852.62
				By Statement Profit & loss	18,097.50
		78,002.76			78,002.76
5th	To Sinking Fund Investment A/c	3,120.10	5th	By Balance b/d	78,002.76
	To General Reserve A/c	96,880.01		By Interest on S.F. Investment A/c	3,900.12
				By Statement Profit & loss	18,097.50
		1,00,000.11			1,00,000.11

Sinking Fund Investment Account

Date	Particulars	₹	Date	Particulars	₹
1st	To Bank A/c	18,097.50	1st	By Balance c/d	18,097.50
		18,097.50			18,097.50
2nd	To Balance b/d	18,097.50	2nd	By Balance c/d	37.099.87
	To Bank A/c	19,002.37
		37.099.87			37.099.87
3rd	To Balance b/d	37.099.87	3rd	By Balance c/d	57,052.37
	To Bank A/c	19,002.37
		57,052.37			57,052.37
4th	To Balance b/d	57,052.37	4th	By Balance c/d	78,002.49
	To Bank A/c	20,950.12
		78,002.49			78,002.49
5th	To Balance b/d	78,002.49	5th	By Bank A/c	74,882.39
				By Sinking Fund Investment A/c	3,120.10
		78,002.49			78,002.49

Interest on Sinking Fund Investment Account

Date	Particulars	₹	Date	Particulars	₹
2nd	To Sinking Fund A/c	904.87	2nd	By Bank A/c	904.87
		904.87			904.87
3rd	To Sinking Fund A/c	1,855	3rd	By Bank A/c	1,855
		1,855			1,855
4th	To Sinking Fund A/c	2,852.62	4th	By Bank A/c	2,852.62
		2,852.62			2,852.62
5th	To Sinking Fund A/c	3,900.12	5th	By Bank A/c	3,900.12
		3,900.12			3,900.12

Debentures Holders Account

Date	Particulars	₹	Date	Particulars	₹
5th	To Bank A/c	10,000	5th	By Debentures	10,000
		10,000			10,000

Working Note :-

(1) Annual installment to be credited to Sinking fund account :

Amount required = Rs. 1,00,000

Annuity table multiplier = 0.180975

So, 1,00,000 X 0.180975 = Rs. 18097.50 paise

(2) Sale proceeds of investment :

Book value of investment = Rs. 78002.49

96% i.e., 78,002.49 X 96% = Rs. 74,882.39

It all about Question 21 Chapter 10 of +2-Part-1, If you have any problem please comment below.

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