In: Accounting
9. A $2,000,000 bond was issued on April 20, 2020 to build a new bridge. The bonds carried a 4% interest rate and are due in 10 years. The first bond payment was made on March 31, 2021 for $280,000, which included $80,000 of interest.
Required:
(A.) Prepare the required journal entry in the Capital Projects Fund on April 20 for the Fund Financial Statements and the entry on March 31 to record the repayment of the bonds.
(B.) Prepare the required journal entries for the Government-Wide Financial Statements.
Government Funds Accounting is based on Current Financial Resources and therefore only Expenditure & Revenue which is to be settled or earned in next 1 year is to be reported only . Therefore , in case of Long term Debt , only next 1 year outlay is to be recorded
Journal Entries in the books of Capital Projects Fund
Apr 20 : Capital Expenditure Dr .. 2000000- ( Assuming Wholly incurred in next 1 year )
To Bank 2000000
Mar 31 : No Entry -- Records Actual Expenditure only
Journal Entries in the books of Debt Service Fund
Apr 20 : Bank Dr 200000
To Bonds 200000
Mar 31 Bank Dr 80000
To Debt Service Cost 80000
Mar 31 : Bonds Dr 200000
Debt Service Cost Dr 80000
To Bank A/c 280000
Journal for Government wide Financial Statements
Apr 20 : Bank A/c Dr .. 2000000
To Long term Bonds (as it is of 10 yrs ) 2000000
Mar 31 : Bonds Dr 200000
Interest Dr 80000
To Bank A/c 280000