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Capable Company provided the following transactions related to a sinking fund for retirement of bonds payable:
a. In accordance with the terms of the bond indenture, cash in the amount of P2,000,000 is transferred at the end of the first
year, from the regular cash account to the sinking fund. The entity administers the fund.
b. The sinking fund cash is used to acquire AB Company 12% bonds of P500,000 face value, maturing in five years, for
P450,000.
c. The sinking fund cash is used to acquire 10% P100 par value CD 5,000 preference shares, at P80 per share.
d. Annual interest is received on the AB bonds. The discount on the bonds is amortized accordingly using straight line method.
e. Sinking fund expenses of P20,000 are paid from the sinking fund cash.
f. The sinking fund cash is used to acquire EF Company 10% bonds of P400,000 face value, maturing in four years for P400,000
plus accrued interest of P10,000.
g. Annual dividends are received on the CD preference share.
h. Interest is received on the EF bonds, P20,000, including the accrued interest at the time of purchase.
i. All EF bonds are sold for P450,000. No interest is accrued at the time of sale.
j. Retained earnings are appropriated in an amount equal to the sinking fund balance.
Prepare journal entries on the books of Decorum Company to record the transactions.
The entity followed the calendar year as the accounting period. The president died on July 1, 2019 and the face of the policy was
collected in July 31, 2019.
Prepare the journal entries from April 1, 2015 to July 31, 2019.
The above accounts are the only ones in the statement of financial position which pertain to the insurance policy or the loan. Upon
investigation, the following data are gathered:
a. The cash surrender value reported in the statement of financial position is for June 30, 2016. The cash surrender value was
P80,000 on June 30, 2015.
b. On June 30, 2015, the entity paid the annual premium of P30,000 minus the dividend declared of P2,000.
c. The loan from the insurance company is a one-year note dated April 1, 2015. The 12% interest is payable on the date of
maturity.
d. The dividend declared was recorded by debiting dividend receivable and crediting dividend income.
Requirement: