Accounting · Sinking Fund
In the context of replacing a Fixed Asset funded through a Sinking Fund, the interest earned on Sinking Fund Investments is accounted for by:
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1Crediting the Fixed Asset Account to reduce the original cost.
- 2Debiting the Sinking Fund Investment Account to reduce the investment value.
- 3Crediting the Sinking Fund Account to increase the reserve.✓
- 4Crediting the Profit and Loss Account (Income) to increase the net profit.
Correct answer
Crediting the Sinking Fund Account to increase the reserve.
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