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Problem 11. Prosperous Ltd. issued 25,000 7 per cent Debentures of $ 100 each at a discount 2% 25 per cent on 1st January 2013. As per the terms of the issue, the company is required to maintain a non-cumulative Sinking Fund (i.e., exclusive of interest on Sinking Fund investments) but with a provision that the company shall have the power to apply the Sinking Fund Investments in the purchase of Debentures in the open market, if below par, at any time. The annual Sinking Fund contribution is $60,000. Following are the relevant facts for the years 2014 and 2015 : (A) Interest received by the company on Investments: (1) 2014 $ 1,970 (2) 2015 $ 3,040 (B) Realisation of Sinking Fund Investments : (1) 31 December 2014 $ 27,930 (original cost $ 28,010) (2) 31 December 2015 $ 39,000 (original cost $ 38,700) (C) Debentures purchased in the open market : (1) 31 December 2014 at cost of $ 27,915 (paid up value $ 29,315) (2) 31 December 2015 at cost of $ 39,000 (paid up value $ 39,150) You are required to prepare the necessary Ledger Accounts for the two years.

Problem 11. Prosperous Ltd. issued 25,000 7 per cent Debentures of $ 100 each at a discount 2% 25 per cent on 1st January 2013. As per the terms of the issue, the company is required to maintain a non-cumulative Sinking Fund (i.e., exclusive of interest on Sinking Fund investments) but with a provision that the company shall have the power to apply the Sinking Fund Investments in the purchase of Debentures in the open market, if below par, at any time. The annual Sinking Fund contribution is $60,000. Following are the relevant facts for the years 2014 and 2015 : (A) Interest received by the company on Investments: (1) 2014 $ 1,970 (2) 2015 $ 3,040 (B) Realisation of Sinking Fund Investments : (1) 31 December 2014 $ 27,930 (original cost $ 28,010) (2) 31 December 2015 $ 39,000 (original cost $ 38,700) (C) Debentures purchased in the open market : (1) 31 December 2014 at cost of $ 27,915 (paid up value $ 29,315) (2) 31 December 2015 at cost of $ 39,000 (paid up value $ 39,150) You are required to prepare the necessary Ledger Accounts for the two years.

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Problem 11. Prosperous Ltd. issued 25,000 7 per cent Debentures of $ 100 each at a discount 2% 25 per cent on 1st January 2013. As per the terms of the issue, the company is required to maintain a non-cumulative Sinking Fund (i.e., exclusive of interest on Sinking Fund investments) but with a provision that the company shall have the power to apply the Sinking Fund Investments in the purchase of Debentures in the open market, if below par, at any time. The annual Sinking Fund contribution is $60,000. Following are the relevant facts for the years 2014 and 2015 : (A) Interest received by the company on Investments: (1) 2014 $ 1,970 (2) 2015 $ 3,040 (B) Realisation of Sinking Fund Investments : (1) 31 December 2014 $ 27,930 (original cost $ 28,010) (2) 31 December 2015 $ 39,000 (original cost $ 38,700) (C) Debentures purchased in the open market : (1) 31 December 2014 at cost of $ 27,915 (paid up value $ 29,315) (2) 31 December 2015 at cost of $ 39,000 (paid up value $ 39,150) You are required to prepare the necessary Ledger Accounts for the two years.
Transcribed Image Text:Problem 11. Prosperous Ltd. issued 25,000 7 per cent Debentures of $ 100 each at a discount 2% 25 per cent on 1st January 2013. As per the terms of the issue, the company is required to maintain a non-cumulative Sinking Fund (i.e., exclusive of interest on Sinking Fund investments) but with a provision that the company shall have the power to apply the Sinking Fund Investments in the purchase of Debentures in the open market, if below par, at any time. The annual Sinking Fund contribution is $60,000. Following are the relevant facts for the years 2014 and 2015 : (A) Interest received by the company on Investments: (1) 2014 $ 1,970 (2) 2015 $ 3,040 (B) Realisation of Sinking Fund Investments : (1) 31 December 2014 $ 27,930 (original cost $ 28,010) (2) 31 December 2015 $ 39,000 (original cost $ 38,700) (C) Debentures purchased in the open market : (1) 31 December 2014 at cost of $ 27,915 (paid up value $ 29,315) (2) 31 December 2015 at cost of $ 39,000 (paid up value $ 39,150) You are required to prepare the necessary Ledger Accounts for the two years.
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