Question

19. On 1st April 2001 ABC Itd. issued, 4,420 12% debentures of 100 each at a discount of 10%
redeemable at a premium of 5% after 4 years. It was decided to institute a sinking fund for
the purpose of accumulating sufficient funds to redeem the debentures and to invest in
some readily convertible securities yielding (10% interest p.a. Reference to the table that 1
p.a. at 10% compound interest amounts to 4.641 in 4 years. Investments are to be made in
bonds of 100 each available at par.
On 31st March 2005, the investments realised 3,40,000 and debentures were redeemed
The bank balance as on that date was * 1,00,000
Required: Give the necessary journal entries and prepare debenture redemption reserve
A/c and the debenture redemption fund investments A/c for 4 years. [ignore interest on
debentures and writing off discount on issue of debentures]
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Answer 1

Answer:

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