On February 1, 20X1, Cyrotech, Inc., received \($300,000.00\) cash for a bond issue. The bond agreement provides that a bond sinking fund is to be increased annually by \($37,500.00\) for the next eight years. The bond trustee has guaranteed Cyrotech an interest rate of 4% on its sinking fund investment. A cash receipts journal, cash payments journal, and general journal are provided in the Working Papers. Your instructor will guide you through the following examples.

Journalize the transactions.

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Feb. 1, 20X1. Received cash for face value of an 8-year, 10%, $500.00 par value bond issue, $300,000.00. Receipt No. 135. 1,20X2. Paid cash to bond trustee for annual interest on bond issue, $30,000.00. Check No. 201. 1,20X2. Paid cash to bond trustee for first annual deposit to bond sinking fund. Check No. 202. 1,20X3. Paid cash to bond trustee for annual interest on bond issue, $30,000.00. Check No. 313. 1, 20X3. Paid cash to bond trustee for annual deposit to bond sinking fund and recorded interest earned on bond sinking fund. Check No. 314. (Interest earned equals 4% of the bond sinking fund deposit made on February 1, 20X2.) 3,20X9. Received notice from bond trustee that bond issue was retired using bond sinking fund, $300,000.00. Memorandum 87.