1. (Cancellation of Own Debentures on a subsequent date where Sinking Fund does not exist)
Continuing Illustration No. 19, if the Debentures held by the company are cancelled on 31st March, 2011, show the necessary journal entries on cancellation and the effect of the same in the Balance Sheet of the company.
2. (When Debentures are purchased as investments of Sinking Fund).
Confident Ltd. had 2,000 12% Debentures of Rs.100 each outstanding as on 1st April 2010. The following other balances also appeared in the books of the company o n this date:
|
|
Rs |
|
Debentures Redemption Fund Account |
1,00,000 |
|
Debentures Redemption Fund Investments: |
|
|
12% Port Trust Bonds (face value Rs.60,000) |
55,000 |
|
Own Debentures (face value Rs.50,000) |
45,000 |
Interest on the debentures was payable on 30th September and 31st March and interest on Port Trust Bonds was received on the same dates.
On 1st August, 2010, Rs.20,000, 12% Port Trust Bonds were sold at Rs.95 ex interest and the amount realised was invested in Own Debentures at Rs.97 cuminterest. During the year a sum of Rs.5,800 was appropriated for the Sinking Fund which together with the interest received on Sinking Fund during the year was invested in Own Debentures at Rs.95 each.
You are required to show the journal entries and ledger accounts in the books of the company. Also show how the items will appear in the Balance Sheet of the company. Ignore Income tax.