On May 6, 2017, 4% deferred serial bonds with a face value of $2,000,000 were so

Question

On May 6, 2017, 4% deferred serial bonds with a face value of $2,000,000 were sold for a total amount of $2,070,000, of which $28,000 was for accrued interest from the January 1, 2017 date of the bonds and $42,000 was a premium on the bonds sold. Cash in the amount of the accrued interest and premium was deposited directly in the Street Improvement Bond Debt Service Fund. Cash in the amount of $2,000,000 was deposited and recorded in the Street Improvement Fund.

Required: Record these transactions in the Street Improvement Fund and governmental activities journals. (Hint: In addition to recording the liability for bonds payable in the governmental activities journal, you should record the premium on the bonds payable [credit Premium on Deferred Serial Bonds] and accrued interest on bonds sold [we recommend that you credit Expense—Interest on Long-term Debt] in the governmental activities general journal for the $28,000 of accrued interest.) For now you should not make the entries in the Street Improvement Bond Debt Service Fund to record the accrued interest and premium. Those entries will be made in Chapter 6 of this cumulative problem.

Explanation / Answer

Date Particulars Debit $ Credit $ 06/05/2017 Cash A/c DR 2000000 Interest on Long Term Debt A/c DR 28000 Premium on Deferred Serial Bonds A/c DR 42000 To 4% Deferred Serial Bonds A/c 2070000 06/05/2017 Street Improvement Fund A/c DR 2000000 To Cash A/c 2000000 06/05/2017 Street Improvement Bond Debt Service Fund A/c DR 70000 To Interest on Long Term Debt A/c 28000 To Premium on Deferred Serial Bonds A/c 42000

Related Questions

Navigate

• Browse (All)
• Browse O
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.