If government bonds are sold at a premium to finance a capital project, what is the...

If government bonds are sold at a premium to finance a capital project, what is the important question for the premium? Discussing proper accounting for bond installments in the Capital Projects Fund, Debt Service Fund, and data at the government level, assuming that the premium should be reserved for debt servicing

Expert Solution

If bonds are sold at premium that means its interest rate is higher than the current rates in market.

Accounting in capital project fund

Expenditure A/c Dr.

Interest A/c Dr.

To cash A/c

Accounting in Debt service fund

Expenditure Payable A/c Dr.

Interest payable A/c Dr.

To Cash A/c

Accounting at government

Bonds Payable A/c Dr.

Interest A/c Dr.

To Cash A/c

ekkarill92 answered 3 years ago

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