Question

The following balances appeared in the books of Z Ltd on January 1,2004.

$\begin{array}{cc}\text{Items}& \text{Rs.}\\ \text{12\% Debentures}& 1,50,000\\ \text{Debentures Redemption Reserve Fund}& 1,25,000\\ \text{Debentures Redemption Fund Investment}& 1,25,000\\ \text{(Represented by Rs. 1,47,500, 3 \% Govt. Securities )}& 1,25,000\end{array}$

The annual installment added to the fund is Rs. 20,575. On December 31,2004, the bank balance after the receipt of interest on the investment was Rs. 39,100. On that date, all the invesment were sold at 83% and the debentures were duly redeemed.
Show the necessary ledger accounts for the year 2004.

Answer 1

$\begin{array}{ccccccc}& & & & & & \\ \text{Dr}& & & & \text{12\% Debentures Account}& & \text{Cr}\end{array}$

$\begin{array}{cccccccc}\text{Date}& \text{Particulars}& \text{JF}& \text{Amt. (Rs)}& \text{Date}& \text{Particulars}& \text{JF}& \text{Amt. (Rs)}\\ 2004& & & & 2004& & & \\ \text{Dec 31}& \text{Debentures}& & 1,50,000& \text{Jan 1}& \text{Balance}& & 1,50,000\\ & \text{Holders}& & & & \text{b/d}& & \\ & & & \overline{\underset{–}{\underset{–}{1,50,000}}}& & & & \overline{\underset{–}{\underset{–}{1,50,000}}}\end{array}$

$\begin{array}{ccccccc}& & & & & & \\ \text{Dr}& & & & \text{Debentures Redemption Reserve Fund Account}& & \text{Cr}\end{array}$

$\begin{array}{cccccccc}\text{Date}& \text{Particulars}& \text{JF}& \text{Amt. (Rs)}& \text{Date}& \text{Particulars}& \text{JF}& \text{Amt. (Rs)}\\ 2004& & & & 2004& & & \\ \text{Dec 31}& \text{Redemption}& & & \text{Jan 1}& \text{Balance b/d}& & 1,25,000\\ & \text{Fund Investment}& & 2,575& & & & \\ & & & & & & & \\ \text{Dec 31}& \text{General Reserve}& & 1,47,425& \text{Dec}& \text{Profit and}& & 20,575\\ & \text{(Balancing figure)}& & & & \text{Loss}& & \\ & & & & 31& \text{Appropriation}& & \\ & & & & \text{Dec}& \text{Interest on}& & \\ & & & & 31& \text{Debentures}& & \\ & & & & & \text{Redemption}& & 4,425\\ & & & & & \text{Fund}& & \\ & & & & & \text{Investment}& & \\ & & & \overline{\underset{–}{\underset{–}{1,50,000}}}& & & & \overline{\underset{–}{\underset{–}{1,50,000}}}\end{array}$

$\begin{array}{ccc}& & \\ \text{Dr}\text{Debentures Redemption Reserve Fund Investment Account}& & \text{Cr}\end{array}$

$\begin{array}{cccccccc}\text{Date}& \text{Particulars}& \text{JF}& \text{Amt. (Rs)}& \text{Date}& \text{Particulars}& \text{JF}& \text{Amt. (Rs)}\\ 2004& & & & 2004& & & \\ \text{Jan 1}& \text{Balance b/d}& & 1,25,000& \text{Dec 31}& \text{Bank (W Note)}& & 1,22,425\\ & \text{(for value}& & & & & & \\ & \text{Rs. 1,47,500)}& & & & & & \\ & & & & & \text{Debentures}& & 2,575\\ & & & & & \text{Redemption}& & \\ & & & & & \text{Fund (Loss)}& & \\ & & & & & \text{(Balancing Figure)}& & \\ & & & \overline{\underset{–}{\underset{–}{1,25,000}}}& & & & \overline{\underset{–}{\underset{–}{1,25,000}}}\end{array}$

$\begin{array}{ccccccc}& & & & & & \\ \text{Dr}& & & & \text{Bank Account}& & \text{Cr}\end{array}$

$\begin{array}{cccccccc}\text{Date}& \text{Particulars}& \text{JF}& \text{Amt. (Rs)}& \text{Date}& \text{Particulars}& \text{JF}& \text{Amt. (Rs)}\\ 2004& & & & 2004& & & \\ \text{Dec 31}& \text{Balance b/d}& & 39,100& \text{Dec 31}& \text{Debenture}& & 1,50,000\\ & & & & & \text{Holders}& & \\ & \text{Debenture}& & 1,22,425& & \text{Balance c/d}& & 11,525\\ & \text{Redemptipon}& & & & & & \\ & \text{Fund}& & & & & & \\ & & & \overline{\underset{–}{\underset{–}{1,61,525}}}& & & & \overline{\underset{–}{\underset{–}{1,61,525}}}\end{array}$

Working Note
Value of Investment sold = Face value $\times 83\%=1,47,500\times \frac{83}{100}=Rs1,22,425$