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Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281

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Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281
Textbook Problem
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Sinking Funds Entries The following information is available concerning Nunan Corporation’s sinking fund:

Chapter 13, Problem 26E, Sinking Funds Entries The following information is available concerning Nunan Corporations sinking

Required:

Prepare journal entries to record the preceding transactions for Nunan.

To determine

Prepare the journal entries in the books of Corporation N.

Explanation

Investment: It refers to the process of using the currently held excess cash to earn profitable returns in future. The investments can be made in equity securities such as shares or debt securities such as bonds.

Prepare journal entries in the books of Corporation N to record the sinking fund transactions during the year 2019.

DateAccount Title and Explanation Debit Credit 
January 1, 2019Sinking fund cash$425,000 
 Cash $425,000
 (To record the establishment of sinking fund)  
    
February 3, 2019Sinking fund securities$400,000 
 Sinking fund cash $400,000
 (To record the purchase of sinking fund securities)  
    
July 30, 2019Sinking fund cash$45,000 
 Loss on sale of sinking fund securities$3,000 
 Sinking fund securities $48,000
 (To record the sale of sinking fund securities)  
    
December 31, 2019Sinking fund cash$49,000 
 Sinking fund revenues $49,000
 (To record the dividend and interest income earned from sinking fund securities)  
    
December 31, 2019Allowance for change in the value of sinking fund ($355,000[$400,000$48,000])$3,000 
 Unrealized increase in value of Sinking fund securities $3,000
 (To record the unrealized increase in the value of sinking fund securities)  

Table (1)

Prepare journal entries in the books of Corporation N to record the sinking fund transactions during the year 2020

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