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

ekkarill92 answered 1 year ago

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