6 million The Sneezy Village Debt Service Fund accumulates resources to pay its

Question

6 million The Sneezy Village Debt Service Fund accumulates resources to pay its S general obligation debt. over 20 years with 5% interest on the unpaid principal. Prepare journal entries to record The debt is payable in equal annual installments of principal the following transactions in the Debt Service Fund a. The Village levies a special property tax amounting to $1,000,000 to pay debt service on its long-term obligation debt. The proceeds are transferred from the General Fund to the Debt Service Fund. b. The Village pays the fiscal agent its fee of $10,000. c. The Village invests $975,000 in a six-month certificate of deposit. The certificate of deposit in c. matures and the Village receives a total of $999,375, which includes $24,375 of interest. e.The Village sends $720,000 to its fiscal agent in anticipation of paying debt service. f. Debt service (interest of $320,000 and principal of $400,000) becomes due and payable. g. The fiscal agent pays principal and interest to bond holders. h. The Village pays the fiscal agent its fee of $10,000.

Explanation / Answer

Account Debit Credit a. Cash $1,000,000 Other financing sources - Transfer in $1,000,000 b. Expenditures - fiscal agent fees 10,000 Cash 10,000 c. Investments 975,000 Cash 975,000 d. Cash 999,375 Investments 975,000 Revenues 24,375 e. Cash with fiscal agent 720,000 Cash 720,000 f. Expenditures - Principal 400,000 Expenditures - Interest 320.000 Bonds Payable 720,000 g. Bonds Payable 720,000 Cash with fiscal agent 720,000 h. Expenditures - fiscal agent fees 10,000 Cash 10,000

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