Case 1 - Sinking Fund The following information is available concerning the Sky Corporation's sinking fund transactions in the current period. There is no trustee. Jan. 1 Established a sinking fund to retire an outstanding bond issue by contributing P425,000. Jan. 15 Purchased securities for P400,000. Jul. 30 Sold securities originally costing P48,000 for P45,000. Dec. 31 Collected dividends and interest on the remaining securities in the amount of P49,000; the securities had a market value of P360,000 at this time. Per trial balance of the company, the balance of the sinking fund amount to P425,000. 1. The sinking fund balance at December 31 is understated by? 2. How should the client report the sinking fund in the company's statement of financial position as of December 31? a. The cash in the sinking fund should appear as a current asset. b. Only the accumulated deposits should appear as a noncurrent asset. C. The entire balance in the sinking fund account should appear as a current asset. d. The entire balance in the sinking fund account should appear as a noncurrent asset