5-8. The Village of Hawksbill issued $4,000,000 in 5 percent general obligation,

Question

5-8. The Village of Hawksbill issued $4,000,000 in 5 percent general obligation, tax-supported bonds on July 1, 2016, 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, 2017. Hawksbill has a calendar fiscal year 1. A capital projects fund transferred the premium (in the amount of $40,000) to the debt service fund 2. On December 31, 2016, funds in the amount of $100,000 were received from the General Fund and the first interest payment was made 3. The books were closed for 2016 4. On June 30, 2017, funds in the amount of $260,000 were received from the General Fund, and the second interest payment ($100,000) was made along with the first principal payment ($200,000) 5. On December 31, 2017, funds in the amount of $95,000 were received from the General Fund and the third interest payment was made (also in the amount of $95,000) 6. The books were closed for 2017 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, 2016 c. Prepare a Statement of Revenues, Expenditures, and Changes in Fund Balance for the debt service fund for the year ended December 31, 2017.

Explanation / Answer

a. Journal Entries

b.i) Statement of Revenue and Expenditure for year ended December 31,2016

b.ii) Statement of Change in Debt Service Fund

c.i) Statement of Revenue and Expenditure for the year ended December 31,2017

c.ii) Statement of Change in Debt Service Fund

Date General Journal Debit ($) Credit ($) July 01,2016 Cash/Bank A/c 4,040,000 To Premium on Issue of Bonds 40,000 To 5% Bonds 4,000,000 (Being amount received on the issue of Tax supported bonds) July01,2016 Premium on issue of Bonds/ Capital Project Fund 40,000 To Debt Service Fund 40,000 (Being amount of premium received transferred to Debt Service Fund) December 31,2016 General Fund 100,000 Debt Service Fund 100,000 (Being amount transferred from General fund to debt Service Fund) December 31,2016 Debt Service Fund 100,000 To Interest on Bonds 100,000 (Being Interest on Bonds charged to the Debt Service Fund) December 31,2016 Interest on Bonds 100,000 To Cash/Bank 100,000 (Being Interset paid on debentures) June 30,2017 General Fund 260,000 Debt Service Fund 260,000 (Being amount transferred from General fund to debt service fund) June 30,2017 Debt Service Fund 300,000 To Interest On Bonds 100,000 To Redemption of 5% Bonds 200,000 (Being Interest and Repayment of bonds charged from the Debt Service Fund June 30,2017 Interest on Bonds 100,000 Redemption of 5% Bonds 200,000 To Cash/Bank 300,000 (Being interest and Principal of the bonds paid) December 31,2017 General Fund 95,000 To Debt Service Fund 95,000 (Being amount transferred from General fund to Debt service fund) December 31,2017 Debt Service Fund 95,000 To Interest on Bonds 95,000 (Being Interest on Bonds charged from the Debt Service Fund) December 31,2017 Interest on Bonds 95,000 To Cash/Bank 95,000 (Being Interest on Bonds paid)

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