Question

The City of Amarillo is authorized to issue $6,900,000, 5 percent regular serial bonds in 2020 for the construction of a new exit off the interstate highway within city limits. The bonds mature in equal annual amounts beginning on January 1, 2021, for 10 years and pay interest on January 1 and July 1. The city is required to use all accrued interest and premiums to service the debt. The funds to pay the interest will be transferred from the General Fund. The county’s fiscal year-end is December 31.

Required

1. Prepare the budgetary entries for 2020 assuming that the bonds were scheduled to be issued on January 2. Assume that the January 1, 2021, principal and interest payments will be included in the 2021 budget. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field. Do not round intermediate calculations.)

b.

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Item 7

Item 7 10 points

The City of Amarillo is authorized to issue $6,900,000, 5 percent regular serial bonds in 2020 for the construction of a new exit off the interstate highway within city limits. The bonds mature in equal annual amounts beginning on January 1, 2021, for 10 years and pay interest on January 1 and July 1. The city is required to use all accrued interest and premiums to service the debt. The funds to pay the interest will be transferred from the General Fund. The county’s fiscal year-end is December 31.

Required

1. Prepare the budgetary entries for 2020 assuming that the bonds were scheduled to be issued on January 2. Assume that the January 1, 2021, principal and interest payments will be included in the 2021 budget. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field. Do not round intermediate calculations.)

2. The bonds were sold on February 1, 2020, at 102. Prepare the journal entries needed to record the issuance of the bonds, including the entries required in the debt service fund and any entries required in the governmental activities general ledger at the government-wide level. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field. Do not round intermediate calculations.)
3. Prepare the entry required to reflect the transfer of funds from the General Fund to the debt service fund. (You may ignore the entry in the General Fund.) (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field. Do not round intermediate calculations.)
4. Prepare the journal entries needed to record the first interest payment made on July 1, including the entries required in the debt service fund and any entries required in the governmental activities general ledger at the government-wide level. Assume that the straight-line method is used for premium amortization. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field. Do not round intermediate calculations.)

Answer 1

Part A

Transaction	Fund	General Journal	Debit	Credit
1.	Debt Service Fund	Estimated Other Financing Sources—Transfers In (6900000*5%*6/12)	172500
		Appropriations		172500

Part B

Transaction	Fund	General Journal	Debit	Credit
1.	Debt Service Fund	Cash	166750
		Other Financing Sources—Premium on Bonds Payable		138000
		Revenues		28750
	Governmental Activities	Cash	7066750
		Bonds Payable		6900000
		Premium on Bonds Payable (6900000*2%)		138000
		Interest Payable (6900000*5%*1/12)		28750

Part C

Transaction	Fund	General Journal	Debit	Credit
1.	Debt Service Fund	Cash	28750
		Other Financing Sources—Interfund Transfers In		28750

Part D

Transaction	Fund	General Journal	Debit	Credit
1.	Debt Service Fund	Expenditures – Interest	172500
		Cash		172500
	Governmental Activities	Interest Payable	28750
		Premium on Bonds Payable (138000/20)	6900
		Interest Expense (balancing figure)	136850
		Cash		172500