BOND SINKING FUNDS M. J. Adams Corporation pays $40,000 into a bond sinking fund each year for the...

Question

BOND SINKING FUNDS M. J. Adams Corporation pays $40,000 into a bond sinking fund each year for the future redemption of bonds. At the end of the first year, earnings on the sinking fund are $3,200. When the bonds mature, there is a balance in the sinking fund of $301,800, of which $300,000 is used to redeem the bonds.
Prepare journal entries to record:
(a) The initial sinking fund deposit.
(b) The first year’s earnings.
(c) The redemption of the bonds.
(d) The return of excess cash to the corporation.

David · Accepted Answer

Journal Entries
Journal Entries
	
	Particulars
	Debit
	Credit
	a.
	Sinking Fund Investment
	40000
	
	
	             Bank
	
	40000
	
	
	
	
	
	Profit & Loss
	40000
	
	
	           Sinking Fund
	
	40000
	
	
	
	
	b.

BOND SINKING FUNDS M. J. Adams Corporation pays $40,000 into a bond sinking fund each year for the future redemption of bonds. At the end of the first year, earnings on the sinking fund are $3,200....

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