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 entries (for one bond) required to record the removal of the old bonds and the issuance of the new refunded bonds.

In which fund would debt refunding normally be recorded? ____________________________________

Part C

The following is a trial balance and several transactions that relate to Ashevilles City Museum Bond Fund.

Asheville - Debt Service Fund - City Museum Bond Fund - Trial Balance - July 1, 2018

Cash $45,000

Investments 60,000

Fund Balance restricted $105,000

Total $105,000 $105,000

The following transactions took place between July 1, 2017 and June 30, 2018:

1. The city council of Asheville adopted the budget for the Museum Bond Fund for the fiscal year. The estimated revenues totaled $135,000, the estimated other financing sources totaled $25,000, and the appropriations totaled $125,000.

2. The General Fund transferred $45,000 to the fund.

3. To provide additional resources to service the bond issue, a property tax was levied upon the citizens. The total levy was $100,000, of which $95,000 was expected to be collected.

4. Property taxes of $60,000 were collected.

5. Revenue received in cash from investments totaled $1,000.

6. Property taxes of $30,000 were collected.

7. A fee of $2,000 was paid to the fiscal bond agent, for help in servicing debt.

8. Interest in the amount of $37,500 and principal in the amount of $50,000 were paid in cash.

9. At the end of the accounting period, a net increase in the fair value of investments totaled $1,000.

Use the preceding information to perform the following:

a) Prepare all journal entries necessary to record the preceding transaction for the City Museum Bond Fund (DSF). Include closing entries.

b) Prepare a statement of revenues, expenditures and changes in fund balance for the City Museum Bond Fund (assume all fund balance is restricted) as of 6/30/18.

c) Prepare a balance sheet as of 6/30/18. Entry No. Debit Credit 1. 2 3 4 5 6 7 8 9 Closing