Question

4. A company issued Rs 200,000, 5% debentures of Rs 100 each at par, repayable at the end of 5 years at a premium of 6%. A sinking fund at 4% compound interest is created for the redemption of debentures. Prepare Sinking Fund Account and Sinking Fund Investment account for 5 years. (Re 1 per year at 4% compound interest amounts to Rs 5.4163 in 5 years).​

Answer 1

Explanation:

Using formula of sinking fund

M=

r

A

[(1+r)

n

−1]

⟹1000=

0.04

A

[(1+0.04)

25

−1]⟹A=2408.19

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