Model: Sinking fund method Rajas Ltd. issued Rs.20,00,000, 10% debentures on 1 January 2008. They were to be redeemed on 31 December 2010. For this purpose, the company established a sinking fund. Investments were expected to earn 5% interest p.a. Sinking Fund Table show that 0.317208 invested annually at 5% amount to Rs.1 in 3 years. On 31 December 2010, the bank balance was Rs.8,40,000 before receipt of interest on sinking fund investments. On that date, the investments were sold for Rs.13,12,000. Interest is payable annually. Calculate the interest to the nearest of a rupee and investments are made in multiples of Rs.100. Ignore tax on debenture interest. Give journal entries. Also prepare the following accounts. (i) 10% debentures A/c; (ii) sinking fund A/c; (iii) sinking fund investments A/c and (iv) bank A/c in the books of the company.
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