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On July 1, 2019, the first day of its 2020 fiscal year, the Town of Bear...

On July 1, 2019, the first day of its 2020 fiscal year, the Town of Bear Creek issued at par $4,200,000 of 8 percent term bonds to renovate a historic wing of its main administrative building. The bonds mature in five years on July 1, 2024. Interest is payable semiannually on January 1 and July 1.

As illustrated in the table below, a sinking fund is to be established with equal semiannual additions made on June 30 and December 31. Cash for the sinking fund additions and the semiannual interest payments will be transferred from the General Fund shortly before the due dates. Investment earnings are added to the investment principal.

Fiscal
Year

Period

Required
Addition

Expected
Earnings

Ending
Balance

2020

1

$

349,822

$

0

$

349,822

2

349,822

13,993

713,637

2021

3

349,822

28,545

1,092,004

4

349,822

43,680

1,485,507

2022

5

349,822

59,420

1,894,749

6

349,822

75,790

2,320,361

2023

7

349,822

92,814

2,762,997

8

349,822

110,520

3,223,339

2024

9

349,822

128,934

3,702,095

10

349,822

148,084

4,200,000


Required

1.      a-1. Prepare journal entries in the debt service fund for the following: (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field. Do not round intermediate calculations.)

On July 1, 2019, record the budget for the fiscal year ended June 30, 2020. Include all inter-fund transfers to be received from the General Fund during the year. An appropriation should be provided only for the interest payment due on January 1, 2020.

A, Term Bond Debt Service Fund:

On December 28. 2019, the General Fund transferred $517,882 to the debt service fund. The addition to the sinking fund was immediately invested in 8 percent certificates of deposit.

B1. Tern Bond Debt Service Fund: Record the transfer fro the general fund to the debt service fund

B2. Record the investment in the certificates of deposit.

On December 28, 2019, the city issued checks to bondholders for the interest payment due on January 1, 2020.

C. Term Bond Debt Service Fund:

On June 27, 2020, the General Fund transferred $517, 822 to the debt service fund. The addition for the sinking fund was invested immediately in 8 percent certificates of deposit.

D1. Term Bond Service Fund: Record the transfer from the general fund to the debt service fund.

D2. Record the investment in the certificates of deposit

Actual interest earned on sinking fund investments at year end (june 30, 2020) was the same as the amount budgeted in the table. This interest adds to the sinking fund balance.

E. Term Bond Service Fund

Solutions

Expert Solution

ekkarill92 answered 2 years ago
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