Prepare journal entries, including adjusting entries needed, to record the following transactions for the Pickens County Transit Authority. Assume the fiscal year ends on April 30.
1. Issued refunding bonds at par, $10,000,000. The interest rate is 10%, payable annually.
Bonds mature in 10 years. Bond issue costs were $200,000.
2. Retired old debt with refunding proceeds of $9,800,000.
• Bonds payable outstanding (old), $9,300,000.
• Unamortized premium on outstanding bonds, $300,000.
• Remaining term of old debt, four years.
3. Annual interest payment ($1,000,000) on new bonds was made at the due date, which is year end.
4. On April 30, 20X2, the Transit Authority leased 10 buses under a six-year, noncancellable capital lease. The capitalizable cost of the buses was $680,000, and an $80,000 down payment was made. The county does not receive title to the leased buses at the end of the lease term.
5. Lease payments made during the fiscal year ended April 30, 20X3, totaled $130,262, including interest of $37,932.
6. The county estimates its probable losses from claims and judgments against the Transit Authority for events occurring in 20X2–20X3 at $227,000. However, only $85,000 of this amount is a current liability.