3. A company had made an issue of 5,000 debentures of Rs. 100 each at par a Sinking Fund having been created to provide for repayment.
Under the terms of issue, the company might under certain conditions purchase the debentures in the open market for cancellation.
On 1-4-2000, 3,800 of the debentures were outstanding and Sinking Fund then amounted to Rs. 2,50,000. The Sinking fund Investments that date consisted of Rs. 1,24,000 5% Loan (2500) standing in the books at Rs.1,20,000.
On 1-4-2000, the directors purchased Rs.20,000 of the debentures in Rs.19,000 realizing 5% Loan (2500) at 96 per cent to raise the necessary funds.
Interest on 5% Loan (2005) was received on 30th September and 31st March and was invested forthwith in further purchase of 5% Loan (2005) at per in each case.
On 31st March,2001 a further Rs.20,000 was credited to the Sinking Fund and invested in 5% Loan (2005), Rs 19,850 of which was purchased.
Pass journal entries to record these transactions in the books of the company and prepare necessary ledger accounts.
