Diego Co. records sinking fund transactions currently and maintains a balance in the retained earnings appropriated for sinking fund account equal to the sinking fund. There is no trustee. The following transactions relate to the company's sinking fund set up for the retirement of its long-term bonds payable.1. In accordance with the terms of the bond indenture, cash in the amount of P18,000,000 is transferred at the end of the first year, from the regular cash account to the sinking fund.2. The sinking fund cash is used to acquire Silang Corp.'s 12%, five-year bonds of 5,000,000 at face value.3. The sinking fund cash is used to acquire 10% P50 par value Melchora Inc. 100,000 preference shares at P80 per share.4. Semi-annual interest is received on the Silang bonds.5. Sinking fund expenses of P200,000 are paid from the fund.6. This sinking fund cash is used to acquire Aquino Co. 10% bonds of P4,000,000, maturing in 4 years at face value plus six months accrued interest.7. Half of the Melchora shares were sold for P100 per share after the receipt of the annual dividends.8. Interest is received on Aquino bonds, including the accrued interest at the time of purchase.9. The Aquino bonds were sold for 99. No interest was accrued at the time of sale.10. Retained earnings are appropriated in the amount equal to the sinking fund balance. Prepare the journal entries to record the transactions.
Diego Co. records sinking fund transactions currently and maintains a balance in the
1. In accordance with the terms of the bond indenture, cash in the amount of P18,000,000 is transferred at the end of the first year, from the regular cash account to the sinking fund.
2. The sinking fund cash is used to acquire Silang Corp.'s 12%, five-year bonds of 5,000,000 at face value.
3. The sinking fund cash is used to acquire 10% P50 par value Melchora Inc. 100,000
4. Semi-annual interest is received on the Silang bonds.
5. Sinking fund expenses of P200,000 are paid from the fund.
6. This sinking fund cash is used to acquire Aquino Co. 10% bonds of P4,000,000, maturing in 4 years at face value plus six months accrued interest.
7. Half of the Melchora shares were sold for P100 per share after the receipt of the annual dividends.
8. Interest is received on Aquino bonds, including the accrued interest at the time of purchase.
9. The Aquino bonds were sold for 99. No interest was accrued at the time of sale.
10. Retained earnings are appropriated in the amount equal to the sinking fund balance.
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