Question

5–C. Part 2. Existing Debt Service Fund Transactions

The City Hall Debt Service Fund of the City of Monroe has been open for five years; it was created to service an $16,000,000, 3 percent tax-supported bond issue. As of December 31, 2016, this serial bond issue had a balance of $12,000,000. Semiannual interest payments are made on January 1 and July 1, and a principal payment of $400,000 is due on January 1 and July 1 of each year.

As this is a regular serial bond debt service fund, the only accounts with balances as of January 1, 2017, were Cash with Fiscal Agent and Fund Balance—Assigned for Debt Service, each with balances of $580,000. (Revenues were raised and collected in cash in 2016 in order to be able to pay bond principal and interest due on January 1, 2017.) The government chose not to accrue interest payable.

Required:

a. Open a general journal for the City Hall Debt Service Fund and prepare journal entries for the following transactions. Control accounts are not necessary

(1) The fiscal agent reported that $180,000 in checks had been mailed to bondholders for interest due on January 1, and $400,000 in checks were mailed for bonds maturing that day.

(2) Cash in the amount of $574,000 was received from the General Fund on June 30 and was transferred to the fiscal agent.

(3) The fiscal agent reported that checks dated July 1 had been mailed to bondholders for interest of $ 174,000 due that day and $400,000 in checks were mailed for bonds maturing that day.

(4) Cash in the amount of $568,000 was received from the General Fund on December 31 and transferred to the fiscal agent to be used for the interest and principal due on January 1 (next fiscal year). The government elected to not accrue the interest or principal at year-end.

b. Post the entries to the City Hall Debt Service Fund ledger (t-accounts).

c. Prepare and post an entry closing all nominal accounts to Fund Balance.

Answer 1

Journal for the city hall service fund

1) Jan 2017

Fiscal Agent loan A/c Dr    $400000

To fiscal Agent A/c                 $400000

2) June 2017

a) Cash A/c Dr. $574000

To Interest A/c    $174000

To General Fund A/c $400000

b) Interest A/c Dr      $174000

Fiscal Agent A/c Dr. $400000

To Cash A/c             $574000

3) Fiscal Agent loan A/c Dr    $400000

To fiscal Agent A/c                 $400000

4)

a) Cash A/c Dr. $568000

To Interest A/c    $168000

To General Fund A/c $400000

b) Interest A/c Dr      $168000

Fiscal Agent A/c Dr. $400000

To Cash A/c             $568000

B)

Ledger Accounts

Fiscal Agent loan A/c
Dr	$	Cr	$
Opening Balance	580000
Fiscal Agent	400000
Fiscal Agent	400000
Fiscal Agent A/c
Dr	$	Cr	$
Cash A/c	400000	Fiscal Agent loan A/c	400000
General Fund A/c
Dr	$	Cr.	$
Cash	400000	Cash	400000
Cash A/c
Dr	$	Cr.	$
Interest A/c	174000	Interest A/c	174000
General Fund A/c	400000	Fiscal Agent A/c	400000
Interest A/c	168000	Interest A/c	168000
General Fund A/c	400000	Fiscal Agent A/c	400000
Interest A/c
Dr	$	Cr.	$
Cash A/c	174000	Cash A/c	174000
Cash A/c	168000	Cash A/c	168000