Question
In: Accounting
The journal entry to record the proceeds of long-term debt in a governmental fund includes a...
The journal entry to record the proceeds of long-term debt in a governmental fund includes a credit to:
A. Revenue
B. Cash
C. A long-term liability account
D. Other financing sources
Solutions
Expert Solution
Answer:- D (Other Financing Sources)
Issue of Long Term Debt (At Par)
The issuance of long-term debt is treated as an other financing sources rather than as revenues. The amount reported equals to the face value of the debt.
For Example
Journal Entry
Cash/Bank (Amount Received) $ 100
To other financing source (Bond/Debt) $ 100
When Bonds/Debts is issued at a Premium:
Issuance Proceeds received are more than face value.
Reported as a separate is called premium on issued of
Bond/Debt.
For example
Journal Entry
Cash/Bank (Amount Received) $ 110
To other financing Source (Bond/Debt) $ 100
To Premium on issued of Bond/Debt $ 10
When Bonds/Debts issued at a discount
issuance Proceeds received are less than face value.
Reported as a separate is called Discount on issued of
Bond/Debt.
For example
Journal Entry
Cash/Bank (Amount Received) $ 90
Discount on issued of Bond/Debt $ 10
To other Financing Source (Bond/Debt) $ 100
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