Question

During the fiscal year ended December 31, 2020, the City of Johnstown issued 5% general obligation serial bonds in the amount of $2,000,000 at 102 ($2,040,000) and used $1,990,000 of the proceeds to construct a fire station. The $40,000 premium was transferred to a debt service fund. The $10,000 left in the capital projects fund at the end of the project was later transferred to the debt service fund. The bonds were dated April 1, 2020 and paid interest on October 1 and April 1. The first of 10 equal annual principal payments was due on April 1, 2021. How would the government account for the transfer of the unused bond proceeds

Answer 1

Answer:

C)  As an other financing source in the debt service fund and as an other financing use in the capital projects fund.

Explanation:

The options are missing:

• A)  As a revenue in the debt service fund and as an expenditure in the capital projects fund.
• B)  As an other financing source in the capital projects fund and as an other financing use in the debt service fund.
• C)  As an other financing source in the debt service fund and as an other financing use in the capital projects fund.
• D)  As a special item in both the debt service and capital project funds.

Other financing sources is an account used by governments to record non-operating revenues and expenditures. The debt service fund is the money that the government has set aside to pay for its outstanding bonds. The capital projects fund is the account used by the government to record expenses related to certain projects.