(Where debentures are purchased as investments and no Sinking Fund exists. This also includes treatment of interest on own debentures).
In the books of Joy Ltd., the 12% Debentures Account showed a credit balance of Rs.2,00,000 consisting of 2,000 debentures of Rs.100 each as on 1st April, 2010.
During the year debentures were purchased in the open market as follows:
1st August, 300 Debentures at Rs.95 ex interest.
1st November, 200 Debentures at Rs.98 cum interest.
The Debentures, thus, purchased were retained as investments of the company. Interest on debentures was payable half yearly on 30th September and 31st March every year.
You are required to show the journal entries and the ledger accounts in the books of the company. Ignore Income tax. Also show how the items would appear in the Balance Sheet.