Question

What is the nature of the financial resource inflows utilized by the capital projects funds? If tax-supported bonds or special assessment bonds are the source, have any been sold at a premium? At a discount? If so, what was the accounting treatment of the bond premium or discount? (Approx. 150 words).

Answer 1

Nature of financial resource inflows used by the capital project funds are as following:

1. Long term debts including bonds, notes and loans.
2. General long term fund.
3. Government grants.
4. Intergovernmental grants.
5. Special assessment bonds.
6. Tax supported bonds.

The above list is not an exhaustive list rather only an inclusive lists of resource inflows used by the capital project funds.

Yes, tax supported bonds or special bonds can be sold at a premium as well as at a discount depending on the situation and availability of resources for the capital project. In case of sale of bonds at a premium or at a discount the accounting entries are as following:

Account titles and explanations	Debit ($)	Credit ($)
Cash / Bank	10000
Bonds		9000
Premium on issue of bond		1000
(Bond issued at premium)
Cash / Bank	9000
Discount on issue of bond	1000
Bonds		10000
(Bond issued at discount)

Note: It has been assumed that in case of bond issued at discount the face value of bond if $9000 which has been issued at a premium of $1000.

In case of bond issued at a discount t has been assumed that the face value of the bond is $10000 and it has been issued at a discount of $1000.

The premium and the discount shall be adjusted over the life of the capital project.