Statement Reporting
You will need to consider the following issue.
Budgetary accounting for regular serial bond debt service funds differs somewhat from that for deferred serial bond or term bond debt service funds.
On July 15, 2005, the city of Houghton issued tax-supported term bonds having a face value of $10,000,000 and maturing in 20 years. The bonds are dated July 15, 2005, and pay interest of 6% semiannually on January 15 and July 15 of each year. The bonds were sold at a price of 102 and were intended to finance construction of a new city jail. The premium on the sale of the bonds was recorded directly in the debt service fund and was immediately invested for eventual retirement of the debt.
For the fiscal year ending June 30, 2006, the City Council approved a budget for the newly established Term Bond Debt Service Fund in the amount of $444,500, which includes $432,500 that will be transferred from the General Fund as follows: (a) $300,000 on January 14, 2006 for the January 15, 2006 interest payment due and (b) $132,500 on June 30, 2006 for investment in the debt service fund for the retirement to principal, and $12,000 of estimated revenue for interest on investment of premium.
Prepare a paper in which you respond to the following:
Compose all journal entries, including the budget entry and closing entry, required in the Term Bond Debt Service Fund for the fiscal year ending June 30, 2006. Investment revenue during the year was $11,800, all of which added to the investment balance.
On July 1, the first day of their fiscal year, the City of Marshall sold bonds with a face value of $10,000,000 at 102% of par. The bonds bear annual interest at 6%; interest is payable semiannually. The bonds will mature in equal installments over 20 years. (Bond premium must be used for eventual bond redemption and is deposited directly into the debt service fund.)
Assuming the bonds are tax-supported bonds sold to finance construction of a sports complex, the operations of which will be financed by a special revenue fund when the complex is completed:
1. Name the type of fund and/or week in which each of the following should be recorded. (If any of the following should not be recorded at all, enter “none” on the appropriate line.)
a. The cash received for the sale of the bonds?
b. The liability of $10,000,000 for Bonds Payable?
c. The cost of the sports complex?
d. Bond interest paid or accrued during the period of construction?
e. Amortization of premium on bonds sold?
2. Show in general journal form all entries that should be made to record the sale of the bond. For each entry, indicate the fund or group in which the entry is made.
For items reported in the Restricted Assets section of an enterprise fund balance sheet, how are the related items reported in the liability and fund equity sections of the balance sheet?
Support your paper with a minimum of five (4) scholarly resources. In addition to these specified resources, other appropriate scholarly resources, including older articles, may be included.
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