Question 19 Chapter 10 of +2-Part-1 - USHA Publication 12 Class Part

Question 19 Chapter 10 of +2-Part-1

19. (Journal/Ledger/Compound Interest) On 1st January, 2014 debentures worth Rs. 75,000were issued at par, repayable at par at the end of five years. In terms of the Trust Deed, a Sinking Fund was to be created for the purpose of redemption.

All investments, including reinvestment of interest received, were made at the end of each year and earned 5% p.a.
Give journal entries and prepare ledger accounts for five years when sinking fund table shows that Rs. 2.71462 invested at the end of each year at compound interest will amount to Rs. 15 at the end of five years.

The solution of Question 19 Chapter 10 of +2 Part-1:-

Solution of Questions 19 20 & 21 Redemption of Debentures Chapter 10 Accounts class 12 PSEB Day 207

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Journal
Date	Particulars		L.F.	Debit ₹	Credit ₹
2014
Jan. 1	Bank A/c	Dr.		75,000
	To Debenture Application & Allotment A/c				75,000
	(being receipt app. Money )

	Debenture Application & Allotment A/c	Dr.		75,000
	To Debenture A/c				75,000
	(Being issue of debentures at par )

Dec. 31	Statement of profit & Loss	Dr.		13,573
	To Sinking fund A/c				13,573
	(Being annual installments appropriated)

	S.F. Investment A/c	Dr.		13,573
	To Bank A/c				13,573
	(Being the investment made)
2015
Dec. 31	Bank A/c	Dr.		679
	To interest on S.F. investment A/c				679
	(Being interest on investment received)

	Interest on S.F investment A/c	Dr.		679
	To Debenture Sinking fund A/c				679
	(Being amount transferred to debentures S.F. A/c)

	Statement of profit & Loss	Dr.		13,573
	To Debentures Sinking fund A/c				13,573
	(Being annual installments appropriated)

	S.F. Investment A/c	Dr.		14,252
	To Bank A/c				14,252
	(Being the investment made)
2016
Dec. 31	Bank A/c	Dr.		1,391
	To Debentures S.F. A/c				1,391
	(Being interest on investment received)

	Interest on S.F investment A/c	Dr.		1,391
	To Debentures S.F. A/c				1,391
	(Being amount transferred to debentures S.F. A/c)

	Statement of profit & Loss	Dr.		13,573
	To Sinking fund A/c				13,573
	(Being annual installments appropriated)

	S.F. Investment A/c	Dr.		14,964
	To Bank A/c				14,964
	(Being the investment made)
2017
Dec. 31	Bank A/c	Dr.		2,139
	To interest on S.F. investment A/c				2,139
	(Being interest on investment received)

	Interest on S.F investment A/c	Dr.		2,139
	To Debentures S.F. A/c				2,139
	(Being amount transferred to debentures S.F. A/c)

	Statement of profit & Loss	Dr.		13,573
	To Sinking fund A/c				13,573
	(Being annual installments appropriated)

	S.F. Investment A/c	Dr.		15,712
	To Bank A/c				15,712
	(Being the investment made)
2018
Dec. 31	Bank A/c	Dr.		2,925
	To interest on S.F. investment A/c				2,925
	(Being interest on investment received)

	Interest on S.F investment A/c	Dr.		2,925
	To Debentures S.F. A/c				2,925
	(Being amount transferred to debentures S.F. A/c)

Dec. 31	Statement of profit & Loss	Dr.		13,573
	To Sinking fund A/c				13,573
	(Being annual installments appropriated)

	Bank A/c	Dr.		58,501
	To Sinking fund investment A/c				58,501
	(Being the investment sold at book value)

	Debentures A/c	Dr.		75,000
	To Debentures Holders A/c				75,000
	(Being amount due on redemption)

	Debenture holders A/c	Dr.		75,000
	To Bank A/c				75,000
	(Being debentures redeemed)

	Sinking Fund A/c	Dr.		74,999
	To General Reserve A/c				74,999
	(Being balance of debentures S.F. transferred to General Reserve A/c)

Debentures Account

Date	Particulars	₹	Date	Particulars	₹
2014			2014
Dec. 31	To Balance c/d	75,000	Jan. 1	By Debentures app. & allotment A/c	75,000
		75,000			75,000
2015			2015
Dec. 31	To Balance c/d	75,000	Jan. 1	By Balance b/d	75,000
		75,000			75,000
2016			2016
Dec. 31	To Balance c/d	75,000	Jan. 1	By Balance b/d	75,000
		75,000			75,000
2017			2017
Dec. 31	To Balance c/d	75,000	Jan. 1	By Balance b/d	75,000
		75,000			75,000
2018			2018
Dec. 31	To Debentures Holders A/c	75,000	Jan. 1	By Balance b/d	75,000
		75,000			75,000

Debentures Sinking Fund Account

Date	Particulars	₹	Date	Particulars	₹
2014			2014
Dec. 31	To Balance c/d	13,573	Dec. 31	By Statement Profit & loss	13,573
		13,573			13,573
2015			2015
			Jan. 1	By Balance b/d	13,573
			Dec. 31	By Interest on S.F. investment A/c	679
Dec. 31	To Balance c/d	27,825		By Statement Profit & loss	13,573
		27,825			27,825
2016			2016
			Jan. 1	By Balance b/d	27,825
			Dec. 31	By Interest on S.F. investment A/c	1,391
Dec. 31	To Balance c/d	42,789	Dec. 31	By Statement Profit & loss	27,825
		42,789			42,789
2017			2017
			Jan. 1	By Balance b/d	42,789
			Dec. 31	By Interest on S.F. investment A/c	2,139
Dec. 31	To Balance c/d	58,501	Dec. 31	By Statement Profit & loss	42,789
		58,501			58,501
2018			2018
			Jan. 1	By Balance b/d	58,501
			Dec. 31	By Interest on S.F. investment A/c	2,139
Dec. 31	To General Reserve	74,999	Dec. 31	By Statement Profit & loss	58,501
		74,999			74,999

Sinking Fund Investment Account

Date	Particulars	₹	Date	Particulars	₹
2014			2014
Dec. 31	To Bank A/c	13,573	Jan. 1	By Balance c/d	13,573
		13,573			13,573
2015			2015
Jan. 1	To Balance b/d	13,573	Jan. 1	By Balance c/d	27,825
Dec. 31	To Bank A/c	14,252
		27,825			27,825
2016			2016
Jan. 1	To Balance b/d	27,825	Jan. 1	By Balance c/d	42,789
Dec. 31	To Bank A/c	14,964
		42,789			42,789
2016			2016
Jan. 1	To Balance b/d	42,789	Jan. 1	By Balance c/d	58,501
Dec. 31	To Bank A/c	15,712
		58,501			58,501
2018			2018
Dec. 31	To Balance b/d	58,501	Jan. 1	By Bank A/c	58,501
		58,501			58,501

Interest Investment Account

Date	Particulars	₹	Date	Particulars	₹
2015			2015
Dec. 31	To Sinking Fund A/c	679	Dec. 31	By Bank A/c	679
		679			679
2016			2016
Dec. 31	To Sinking Fund A/c	1,391	Dec. 31	By Bank A/c	1,391
		1,391			1,391
2017			2017
Dec. 31	To Sinking Fund A/c	2,139	Dec. 31	By Bank A/c	2,139
		2,139			2,139
2018			2018
Dec. 31	To Sinking Fund A/c	2,925	Dec. 31	By Bank A/c	2,925
		2,925			2,925

Debentures Holders Account

Date	Particulars	₹	Date	Particulars	₹
2018			2018
Dec. 31	To Bank A/c	75,000	Dec. 31	To Debentures A/c	75,000
		75,000			75,000

Working Note :-

1. Calculation of annual installments

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Amount required for redemption = Rs. 75,000

If Amount required is Rs. 15 then installment is Rs. 2.71462

If Amount required is Rs. 75,000 then installment is= Rs. 2.71462X 75,000 = Rs. 13573.099

2. Calculation have been made to the nearest rupee

3. It was assumed that investment were realised at book value.

It all about Question 19 Chapter 10 of +2-Part-1, If you have any problem please comment below.

Redemption of Debentures – explained with an example

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Chapter No. 8 – Company Accounts (Share Capital)

Chapter No. 9 – Company Accounts (Issue of Debentures)

Chapter No. 10 – Company Accounts (Redemption of Debentures)

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Chapter No. 12 – Financial Statement Analysis

Chapter No. 13 – Tools of Financial Statement Analysis- Comparative and Common Size

Chapter No. 14 – Accounting Ratios

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The solution of Question 19 Chapter 10 of +2 Part-1:-

Check Out the Solution of all questions of this chapter:

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Check out Part 1 of both books.

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