Question

Jonesboro City issued 10-year regular serial bonds to perform construction on the highway.

The bonds were $7,000,000, 3% bonds, which mature in equal annual amounts beginning on January 1, 20X8 with interest payments on January 1 and July 1.

Per city rules, accrued interest and premiums are used to service the debt.

December 31 is the end of the fiscal year. General Fund transfers will pay the interest.

Required:

Bonds are scheduled for issue on January 2 and principal and interest payments will be included in the 20X8 budget. Prepare budgeted journal entries for the scheduled 20X7 bonds.

Prepare journal entries for bond issuance including entries for debt service fund and in governmental activities general ledger at the government-wide level if bonds are sold on February 1, 20X7, at 101.

What entry would you use to transfer funds from the General Fund in the debt service fund?

The first interest payment was made on July 1. Prepare the journal entries to record the debt service fund and governmental activities general ledger at the government-wide level using the straight-line method for premium amortization.

Prepare adjustments during the fiscal year, if needed for the debt service fund and the governmental activities general ledger at the government-wide level.

Answer 1

Solution:

given Data:Jonesboro City issued 10-year regular serial bonds

The bonds were $7,000,000.

Interest on bonds 3%.

*Debt Service Fund: ESTIMATED OTHER FINANCING SOURCES—

TRANSFER IN 110,000 APPROPRIATIONS

($7,000,000 x 0.03 x ½)

=1,05,000

* Debt Service Fund: CASH 90,000O THER FINANCING SOURCES— BONDPREMIUM                      

   $7,000,000 x .01)

= 70,000

REVENUES= 20,000

* Governmental Activities: CASH =7,087,500, BONDS PAYABLE= 7,000,000

PREMIUM ON BONDS PAYABLE= ($7,000,000 x .01)

                                                       =70,000

ACCRUED INTEREST PAYABLE= ($7,000,000 x .03 x 1/12)

                                                       = 17,500c.

*Calculation of Interfund Transfer to Debt Service Fund:

Amount of appropriation required for the interestpayment due on July 1= $110,000.

Less: Premium (70,000), Accrued interest on bonds (Jan 1-Feb1) (17,500) $ 22,500

*Debt Service Fund: CASH 22,500

THEIR FINANCING SOURCES—INTERFUND TRANSFERS IN 22,500 Payment on the 1st july

Debt Service Fund: TRANSFERS IN 110,000 CASH 110,000 For Governmental Activities BONDS PAYABLE

*INTEREST ON BONDS PAYABLE

= ($7,000,000 x .03)

=2,10,000

ACCRUED INTEREST PAYABLE= ($7,000,000 x .03 x 1/12)

                                                        =17,500 CASH.