Simon Brothers pays $47,000 into a bond sinking fund each year to redeem the fut

Question

Simon Brothers pays $47,000 into a bond sinking fund each year to redeem the future maturity of its bonds. During the first year, the fund earned $3,825, At the time of bond redemption, the fund has a balance of $417,000. Of this, $400,000 was used to redeem the bonds. Journalize the following entries Initial deposit The first year's interest The redemption of the bonds On January 1, Auctions Online issued $300,000, 9%, 10 year bonds to lenders at the contract rate. Interest is to be paid semiannually on July 1 and January 1, Journalize the following entries. Issued the bonds Paul first semiannual interest payment Retired the bonds at maturity

Explanation / Answer

Answer 1:

Answer 2:

Journal Entries Date Accounts Debit $ Credit $ a Investment in bond sinking fund            47,000 Cash       47,000 (Amount invested in bond sinking fund) b Investment in bond sinking fund              3,825 Interest income          3,825 (Earned income on bond sinking fund and reinvested) c Cash          400,000 Investment in bond sinking fund     400,000 (Investment in bond sinking fund sold for redemption) Bonds payable          400,000 Cash     400,000 (Bonds redeemed worth $ 400,000)

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