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Standard XII

Accountancy

Interest on Capital Exceeds Profits

On the basis ...

Question

On the basis of the information given below, answer the following question.
Z Ltd. purchased machine having life of 3 years on 1st April 2008 for Rs 50,000. It is decided to provide for the replacement of the machine at the end of 3 years by setting - up a Sinking fund. Investment will fetch interest at 12 % p.a. Sinking fund tables shows that Rs.0.296349 invested each year will produce Rs 1 at the end of 3 years at 12% p.a. The investments are sold for Rs 28,500.
Interest for the year ended 31 st March, 2010=?

1, 778.04

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3, 769.44

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1, 578.04

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None of the above

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Solution

The correct option is A $1, 778.04$
Depreciation under sinking fund method = value of machine x annuity value
= RS-50,000 x RS-0.296349
= RS-14,817.45.
Interest = Amount invested(depreciation every year) x rate of interest
= RS-14,817.45 x 12/100
= RS-1778.04

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Similar questions

On the basis of the information given below, answer the following question.
Z.Ltd. purchased machine having life of 3 years on 1st April 2008 for Rs 50,000. It is decided to provide for the replacement of the machine at the end of 3 years by setting - up a Sinking fund. Investment will fetch interest at 12 %p.a. Sinking fund tables shows that Rs. 0.296349 invested each year will produce Rs 1 at the end of 3 years at 12 % p.a. The investments are sold for Rs 28,500.

Depreciation to be provided for each year = ?

Q. Madan Engineers Ltd. purchased a new office equipment on

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st January for Rs.

50, 000

on lease basis. The company intends to provide for renewal of lease at the end of

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. Sinking fund table shows Rs.

0.2309

invested every year will provide Re.

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at the end of

5

years at

5 %

interest. How much should be transferred to depreciation fund A/c every year in order to provide for renewal of the plant at the end of

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years.

Q. A sinking fund is created for the redemption of debentures of Rs 10,000 at the end of 25 years. How much money should be provided out of profits each year for the sinking fund if the investment can earn interest at the rate 4% per annum?

On January 1, 2011, X Ltd issue 5,000, 8% Debentures of Rs. 100 each repayable at par at the end of three years. It has been decided to set up a cumulative sinking fund for the purpose of their redemption. The investments are expected to realise 4% net. The Sinking Fund Table shows that Rs. 0.320348 amounts to one rupee @ 4% per annum in three years. On December 31, 2013 the balance at bank was Rs. 2,42,360 and the investments realised Rs. 3,25,000. The debentures were paid off. Give journal entries and show ledger account.

On January 01, 2012, X. Ltd. issues 5,000, 8% Debentures of Rs 100 each repayable at par at the end of three years. It has been decided to set up a cumulative sinking fund for the purpose of their redemption. The investments are expected to realise 4% net. The Sinking Fund Table shows that Rs 0.320348 amounts to one rupee @4% per annum in three years. On December 31, 2015 the balance at bank was Rs 2,42,360 and the investments realised Rs 3,25,000. The debentures were paid off.

Give journal entries and show ledger account.

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The correct option is A 1,778.04Depreciation under sinking fund method = value of machine x annuity value = RS-50,000 x RS-0.296349 = RS-14,817.45.Interest = Amount invested(depreciation every year) x rate of interest = RS-14,817.45 x 12/100 = RS-1778.04

The correct option is A $1, 778.04$
Depreciation under sinking fund method = value of machine x annuity value
= RS-50,000 x RS-0.296349
= RS-14,817.45.
Interest = Amount invested(depreciation every year) x rate of interest
= RS-14,817.45 x 12/100
= RS-1778.04