On January 1, 2018, the Town of Walton issued $ 4,000,000 of 4% tax supported bo
ID: 2531290 • Letter: O
Question
On January 1, 2018, the Town of Walton issued $ 4,000,000 of 4% tax supported bonds. The bonds are dated January 1, 2018 with interest payment dates of June 30 and December 31. The first of 10 annual principal payments is due on December 31, 2018.
Required: Record the following entries to be made by the Debt Service Fund for the bond issued for the year 2012. 10 points
1/1/18 The bonds were sold at a $32,000 premium that was transferred to the Debt Service Fund from the capital projects fund to be used to fund the first payment
2/1/18 Cash sufficient to cover interest for two payments of $80,000 each and the $400,000 principal payments for the year less the premium is transferred from the General Fund on June 1st.
On 6/30 the first semiannual interest is paid to the bond holders by the DSF.
Explanation / Answer
1/1/18
Cash Dr. 32,000
Other Financing Sources-Transfer In Cr. 32,000
(Transfer of Premium on Bonds from CPF)
6/1/18
Cash Dr. 528,000
Other Financing Sources-Transfer In Cr. 528,000
Interest, June 30 (4,000,000 X .04 X ½)= 80,000
Interest, Dec. 31 (4,000,000 X .04 X ½)= 80,000
Principal, Dec. 31 (4,000,000/10)= 400,000
TOTAL CASH NEEDED= 560,000
Less: Premium (32,000)
Cash Needs (Net) 528,000
6/30/18
Expenditure-Bond Interest Dr. 80,000
Cash Cr. 80,000
12/31/18
Expenditure-Bond Interest Dr. 80,000
Expenditure-Bond Principal Dr. 400,000
Cash Cr. 480,000
Closing Entries:
Other Financing Sources-Premium on Bonds Dr. 32,000
Other Financing Sources-Transfers In Dr. 528,000
Expenditures-Bond Interest Cr. 160,000
Expenditures-Bond Principal Cr. 400,000
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