During the fiscal year ended 6/30/15, the City of Harleysville, PA engaged in th

Question

During the fiscal year ended 6/30/15, the City of Harleysville, PA engaged in the following transactions. In July 2014, the city issued $40 million in 5% general obligation term bonds to finance construction of a new building to house city offices. The bonds were issued at a premium of $300,000. In September 2014, the city transferred $2 million from the general fund to cover the $1.2 million principal and $0.8 million interest payments due that month on debt issued in previous years. In September 2014, the city paid the principal and interest due from (b). Required: Assume that the city maintains its books and records in a manner that facilitates the preparation of its “governmental fund” financial statements. Prepare all necessary journal entries that the city should make for each transaction. Clearly indicate in which fund the entry is being made. If no entry is required, write “No entry required.”

Explanation / Answer

Answer :

Following required JOURNAL ENTRIES will be prepared :

Amount (in $' millions)   

July 2014 Bank a/c Dr. 40.3

5% General term bonds a/c Cr. 40

Premium on issue of Bond Cr. 0.3

September 2014 General fund a/c Dr. 2

Debt a/c Cr. 1.2

Interest payment a/c Cr. 0.8

Spetember 2014 Debt a/c Dr. 1.2

Interest Payment a/c Dr. 0.8

Bank a/c Cr. 2

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