Sarthaks Test
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On January 01, 2003 a company issued 15% debentures of Rs.10,00,000 at par. The debentures were redeemable at par after three years on December 31, 2003. A sinking fund was set up to raise funds for redemption of debentures. The amount for the purpose was invested in 6% Government securities of Rs.100 each available at par. The sinking fund table shows that if investments earn 6% per annum, to get Re.1 at the end of 3 years, one has to invest Rs.0.31411 every year together with interest that will be earned. On December 31, 2005, all the Government securities were sold at a total loss of Rs. 6,000 and the debentures were redeemed at par. Prepare Debentures Account Sinking Fund Account, Sinking Fund Investment Account and Interest on Sinking Fund Investment Company closes its books of accounts every year on December 31

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Note: sinking fund is not in syllabus of CBSE.

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