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 To record the transfer of the premium to debt service fund Cash 50,000.00 Transfer-in- General Fund 50,000.00 2 To record the transfer of funds from General fund : Cash 150,000.00 Transfer-in- General Fund 150,000.00 To record the first interest payment Expenditures - Debt Service 150,000.00 Matured Debt services 150,000.00 3 To record the closing books for 2008 Cash Receivable 4,850,000.00 Revenue Principal 4,850,000.00 4 To record the transfer of funds from General fund : Cash 350,000.00 Transfer-in- General Fund 350,000.00 To record the second interest payment and first principal amount Expenditures - Debt Service 250,000.00 Matured Debt services 250,000.00 5 To record the transfer of funds from General fund : Cash 142,500.00 Transfer-in- General Fund 142,500.00 6 To record the closing books for 2009 Cash Receivable 437,500.00 Revenue Principal 437,500.00

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