Prepare the journal entry for the following bond issuance in the capital project fund. 20 year, 4%, General Obligation Serial Bonds with a face value of $5,000,000 are issued at 102. Interest and payments are made on Jan. 1 and July 1 of each year. The principal payment is made once a year starting 1/1/YR5. The premium was transferred into the Debt Service Fund. The General Fund will fully fund each payment as they become due.
Prepare the journal entry for the following bond issuance in the capital project fund. 20 year, 4%, General Obligation Serial Bonds with a face value of $5,000,000 are issued at 102. Interest and payments are made on Jan. 1 and July 1 of each year. The principal payment is made once a year starting 1/1/YR5. The premium was transferred into the Debt Service Fund. The General Fund will fully fund each payment as they become due.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Prepare the journal entry for the following bond issuance in the capital project fund.
20-year, 4%, General Obligation Serial Bonds with a face value of $5,000,000 are issued at 102. Interest and payments are made on Jan. 1 and July 1 of each year. The principal payment is made once a year starting 1/1/YR5. The premium was transferred into the Debt Service Fund. The General Fund will fully fund each payment as they become due.
**Journal Entry:**
| Account Debited | Account Credited | Amount Debited | Amount Credited |
|----------------------------|---------------------------|----------------|-----------------|
| Cash | | 5,100,000 | |
| | OFS – Bond Proceeds | | 5,000,000 |
| | Expenditures – Premium | | 100,000 |
| OFS – Transfers Out | | 100,000 | |
| | Fund Balance | | 100,000 |
Explanation of the table:
- **Cash**: $5,100,000 is the amount received from issuing the bonds.
- **OFS – Bond Proceeds**: $5,000,000 represents the face value of the bonds issued.
- **Expenditures – Premium**: $100,000 is the premium amount (2% of $5,000,000).
- **Transfers Out**: $100,000 is transferred out to the Debt Service Fund.
- **Fund Balance**: $100,000 is credited to the Fund Balance by the transfer.
This entry represents the initial setup of the bond issuance in the capital project fund and the handling of the bond premium.
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