Cook potatoes. Drain and reserve potato water. Mash potatoes. Mix mashed potatoes, potato water, yeast cake soaked in the ½ cup water, and the 2 cups flour. Let stand overnight.
In the morning add the butter, the egg and the sugar, and cream well. Add the lukewarm water, salt and the 5 cups flour. Beat well. Let rise in a warm place until doubled in size.
Punch down and roll ½ inch thick. Cut into rounds with a cookie cutter and drop each round into hot fat, browning on both sides. Remove and drain on paper towels. Roll in sugar while still warm.