Question
1. The City of Smithburg is getting ready to build a new courthouse and incurs the following events in the process. Prepare journal entries for
1. The City of Smithburg is getting ready to build a new courthouse and incurs the following events in the process. Prepare journal entries for these items as they are incurred and indicate whether the journal entry is made in the General Fund (GF), the Capital Projects Fund (CPF), or the Debt Service Fund (DSF). The City of Smithburg does not use encumbrance accounting for its capital projects, so items may be recorded directly to payable accounts when invoiced.
a. The city issues general obligation bonds in the amount of $900,000, receiving cash for the full face amount of the bonds. The cash will be used to buy capital assets.
b. The city buys a prefabricated building for $750,000, using part of the bond proceeds. The building is delivered and the invoice for the building is approved.
c. The invoice approved in transaction b is paid.
d. The General Fund transfers cash of $55,000 to another fund in anticipation of the payment of the first installment of interest ($30,000) and principal ($25,000) on the debt.
e. The first installment of debt service on bonds issued in transaction a becomes due and payable.
Debt service on the bonds issued in transaction a is paid.
GENERAL JOURNAL Page
Date | Description of entry | Post Ref | Debit | Credit | |||
2. The Reiver City Debt Service Fund accumulates resources to pay its $2 million general obligation debt. The debt is payable in equal annual installments of principal over 10 years with 5% interest on the unpaid principal. Prepare journal entries to record the following transactions in the Debt Service Fund.
a. The city levies a special property tax amounting to $500,000 to pay debt service on its long-term general obligation debt. The tax must be accounted for in the Debt Service Fund.
b. All the property taxes levied for debt service purposes are collected.
c. The city invests $150,000 in a six-month certificate of deposit.
d. Debt service (interest of $100,000 and principal of $200,000) becomes due and payable.
e. The debt service liabilities are paid.
f. The certificate of deposit in transaction c matures and the city receives a total of $153,000, which includes $3,000 of interest.
GENERAL JOURNAL Page
Date | Description of entry | Post Ref | Debit | Credit | |||
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