Question

(E 14-21)

Entries for Sinking Fund – Plant Expansion – Numbers Omitted

The transactions given below relate to a fund being accumulated by Hometown Electrical Company over a period of

20 years for the construction of additional buildings.

1.

Cash is transferred from the general cash account to the fund.

2.

Preferred stock of Rick Moore Company is purchased as an investment of the fund.

3.

Bonds of Singapore Corporation are purchased between interest dates at a discount as an investment of the

fund.

4.

Expenses of the fund are paid from the fund cash

5.

Interest is collected on Singapore Corporation bonds.

6.

Bonds held in the fund are sold at a gain between interest dates.

7.

Dividends are received on Rick Moore Company preferred stock.

8.

Common stocks held in the fund are sold at a loss.

9.

Cash is paid from the fund for building construction.

10. The cash balance remaining in the fund is transferred to general cash.

REQUIRED:

Prepare journal entries to record the miscellaneous transactions listed above with amounts omitted.

Answer 1

1. Cash a/c Dr   

To Capital a/c  

2. Purchase a/c Dr

To Capital investment a/c

3. Bonds a/c Dr  

To Capital fund a/c

To Discount received

4. Capital expenses a/c Dr  

To Capital a/c

5. Bank a/c Dr

To interest on Singapore corporation bonds

6. Cash a/c Dr  

To bond a/c

To profit on sales of bond a/c

7. Bank a/c Dr  

To Dividend a/c  

8. Bank a/c Dr

loss at sales of stock a/c Dr

To Capital stock a/c v
9. Building construction  a/c Dr  

To Capital fund a/c

10. Cash a/c Dr  

To Capital fund a/c