Pacic Independent School District issued$100 million of general obligation bonds

Question

Pacic Independent School District issued$100 million of general obligation bonds to nancethe construction of new schools. The bonds wereissued at a premium of $600,000.

1. Prepare the capital projects fund journalentries to record the issue of the bonds andthe transfer of the premium to an appropriatefund.

2. Suppose, instead, that the bonds are issued at adiscount of $600,000 but that the project stillcosts $100 million. Prepare the appropriateentries.

a. Contrast the entries in this part and in
part 1.

b. Indicate the options available to the schooldistrict and tell how they affect the entriesrequired of the district.

c. Suppose the government chose to nancethe balance of the project with generalrevenues. Prepare the appropriate capitalprojects fund entry.

Explanation / Answer

1.

bank account Dr. $100.6 mln

to bond a/c 100

to premium on issue a/c .6

2.

bank a/c dr. 99.4

loss on issue a/c dr. .6

to bond a/c 100

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