Question
A government has bonds outstanding that pay interest at an annual rate of 6% (3% semiannually). The bonds mature in 10 years (20 periods). In
A government has bonds outstanding that pay interest at an annual rate of 6% (3% semiannually). The bonds mature in 10 years (20 periods). In the years since the bonds were issued, annual interest rates on the bonds with similar risk have decreased to 4% (2% semiannually). Because of the decline in interest rates, each of the governments bonds ($1,000 face value) is selling in the secondary market for $1,164. Due to unfavorable debt covenants, the government has determined refunding is appropriate. Provide the governmental fund entries (for one bond) required to record the removal of the old bonds and the issuance of the new refunded bonds.
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In which fund would debt refunding normally be recorded? ____________________________________
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