Question

In: Accounting

Use the following to answer the next four questions: During the fiscal year ended December 31,...

Use the following to answer the next four questions:

During the fiscal year ended December 31, 2019, the City of Johnstown issued 6% general obligation serial bonds in the amount of $2,000,000 and received $2,040,000 and used $1,980,000 of the proceeds to construct a police station. The $40,000 premium was transferred to a debt service fund. The $20,000 left in the capital projects fund at the end of the project was later transferred to the debt service fund. The bonds were dated April 1, 2019 and paid interest of $60,000 on October 1 and $60,000 on April 1. The first of 10 equal annual principal payments ($200,000) was due on April 1, 2020.

1. How would the bond issue be recorded?

a) As a liability in the debt service fund.

b) As a liability in the capital projects fund.

c) As an other financing source in the debt service fund.

d) As an other financing use in the capital projects fund.

2. The amount of capital outlay expenditures reported by the capital projects fund would be:

a) $1,980,000.

b) $2,000,000.

c) $2,040,000.

d) $3,000,000.

3. How would the government account for the transfer of the unused bond proceeds at the end of the project?

a) As a revenue in the debt service fund and as an expenditure in the capital projects fund.

b) A DR to Other Financing Source-Transfer in from the DSF in the Capital Project Fund and DR to Cash in the Debt Service Fund.

c) A CR to Other Financing Sources-Transfer in from CPF in the Debt Service Fund and a CR to Cash in the Capital Project Fund.

d) As a special item in both the debt service and capital project funds.

4) What would be the amount of expenditures recorded by the debt service fund for the fiscal year ended December 31, 2019?

a) $320,000.

b) $200,000.

c) $120,000.

d) $60,000.

Solutions

Expert Solution

1. How would the bond issue be recorded?
a) As a liability in the debt service fund.
b) As a liability in the capital projects fund.
c) As an other financing source in the debt service fund.
d) As an other financing use in the capital projects fund. Correct
2. The amount of capital outlay expenditures reported by the capital projects fund would be:
a) $1,980,000. Correct proceed used to construct a police station
b) $2,000,000.
c) $2,040,000.
d) $3,000,000.
3. How would the government account for the transfer of the unused bond proceeds at the end of the project?
a) As a revenue in the debt service fund and as an expenditure in the capital projects fund.
b) A DR to Other Financing Source-Transfer in from the DSF in the Capital Project Fund and DR to Cash in the Debt Service Fund. correct Resources transferred to the debt service fund from the General Fund would typically be classified
as Other Financing Sources by the debt service fund.As another financing source in the debt service fund and as another financing use in the capital
projects fund
c) A CR to Other Financing Sources-Transfer in from CPF in the Debt Service Fund and a CR to Cash in the Capital Project Fund.
d) As a special item in both the debt service and capital project funds.
4) What would be the amount of expenditures recorded by the debt service fund for the fiscal year ended December 31, 2019?
a) $320,000.
b) $200,000.
c) $120,000. correct 2,000,000 x 6% = $120,000
d) $60,000.

ekkarill92 answered 2 years ago
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