5–7 The Village of Harris issued $5,000,000 in 6 percent general obligation, tax

Question

5–7 The Village of Harris issued $5,000,000 in 6 percent general obligation, taxsupported
bonds on July 1, 2008, at 101. A fiscal agent is not used. Resources
for principal and interest payments are to come from the General Fund. Interest
payment dates are December 31 and June 30. The first of 20 annual principal
payments is to be made June 30, 2009. Harris has a calendar fiscal year.
1. A capital projects fund transferred the premium ($50,000) to the debt
service fund.
2. On December 31, 2008, funds in the amount of $150,000 were received
from the General Fund and the first interest payment was made.
3. The books were closed for 2008.
4. On June 30, 2009, funds in the amount of $350,000 were received from
the General Fund, and the second interest payment was made along with
the first principal payment ($250,000).
5. On December 31, 2009, funds in the amount of $142,500 were received
from the General Fund and the first interest payment was made.
6. The books were closed for 2009.
a. Prepare journal entries to record the events above in the debt service
fund.
b. Prepare a Statement of Revenues, Expenditures, and Changes in Fund
Balance for the debt service fund for the year ended December 31,
2008.
c. Prepare a Statement of Revenues, Expenditures, and Changes in Fund
Balance for the debt service fund for the year ended December 31,
2009.

Explanation / Answer

1 General Purpose Fund 50,000.00 Debt Service Fund 50,000.00 2 General Purpose Fund 150,000.00 Debt Service Fund 150,000.00 Debt Service Fund 150,000.00 Cash 150,000.00 (To record the interest payments ) 4 General Purpose Fund 350,000.00 Debt Service Fund 350,000.00 5 Debt Service Fund 350,000.00 Cash 350,000.00 (To record the interest and principal payments ) 6 General Purpose Fund 142,500.00 Debt Service Fund 142,500.00 2008 Amount received from General Fund 50,000.00 (transfer of premium ) Received from General fund 150,000.00 Less : Interest payments (150,000.00) Balance in the fund 50,000.00 2009 Opening Balance 50,000.00 Received from General fund 350,000.00 Less : Principal and Interest payments (350,000.00) Add : received from General Fund 142,500.00 Balance in the fund 192,500.00

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