a. Record the following accounts and balances in the debt service fund general journal, selecting 2016 from the [Year] menu and using para. 6-a for the [Transaction Description].When completed select [Post Entries] to post the entries in the general ledgers.(Note: These opening balances were previously recorded in the governmental activities general journal in Chapter 2 of this project.)

CITY OF BINGHAM

Debt Service Fund

Trial Balance

AsofDecember 31, 2016

Debits Credits

Cash $ 950,000

Taxes ReceivableDelinquent 85,000

Allowance for Uncollectible Delinquent $ 54,000

Taxes

Interest and Penalties Receivable on Taxes 9,600

Allowance for Uncollectible Interest and

Penalties 960

Fund BalanceRestricted 989,640

Totals $1,044,600 $1,044,600

Additional Information:

On January 1, 2017, the City of Bingham sold a 12-year issue of tax-supported serial bondsto finance the construction and equipping of an annex to City Hall. As describedin Chapter 5 of this cumulative problem, the total amount of bonds issued on that date was $7,500,000, sold at 101. The issue bears interest at the annual rate of 3 percent, payable on January 1 and July 1 of each year; bonds in the amount of $375,000 will mature on January 1, 2018, and every six months thereafter until maturity. The premium on these bonds will be amortized using the straight-line method over 24 periods. Cash for the payment of interest in 2017 will be provided by the General Fund (see Chapter 4).

Before closing the City of Bingham, click on [File], and [Save/Save As] to save your work.If you close the file by clicking on the [X] box you will be asked if you want to save your changes before closing.

Required:

b. Prepare general journal entries, as necessary to record the following transactions in the debt service fund general journal and, if applicable, in the governmental activities general journal. Use account titles listed under the drop down [Account (# - Description)] menu. Be sure the year 2017 is selected from the drop-down [Year] menu and the appropriate paragraph number shown in bold-face font below is in the [Transaction Description] box.

1. [Para. 6-b-1] From the data given about the bond issue already outstanding on January 1, 2017, and the City Hall Annex Construction Fund bond issue sold on that date, city officials adopted a legal budget for the fiscal year ended December 31, 2017.

Required: Record the budget for the Bingham Debt Service Fund for year 2017. Budgetary entries have no effect on the government-wide accounting records.The budget provides for estimated revenues of $700,000 from property taxes, $2,000 of interest and penalties on taxes, and $9,000 of earnings on investments. It also provides for estimated other financing sources for premiums on bonds of $75,000 and interfund transfers in from the General Fund of $50,000. Appropriations of $812,500 were provided for the payment of bond principal of $500,000 maturing on September 30 and $312,500 for bond interest payments due on March 31(100,000) , July 1(112,500) , and September 30(100,000) , 2017 (.02 X 6/12 X $10,000,000 + .03 X 6/12 X $7,500,000 + .02 X 6/12 X $10,000,000). (In the Debt Service Fund, the City opts not to budget for the subsequent year January 1 interest payment.)

Est Revenue Taxes (Dr. 700,000)

Est Revenue Interest and Penalties on Taxes (Dr. 2,000)

Est Revenue Investment Income (Dr. 9,000)

Est OFS Prem on Bonds (Dr. 75,000)

Est OFS Interfund Transfers in (Dr. 50,000)

Appropriations (Cr. 812,500)

Budgetary Fund Balance (Cr. 23,500)

2. [Para. 6-b-2] Taxes were levied by the debt service fund in the amount of $705,000. Of this amount, $5,000 was expected to be uncollectible.

Required: Record these transactions in both the debt service fund and governmental activities journals.

Debt Service Fund

Taxes Rec Current (Dr. 705,000)

Allow for uncollectible taxes (Cr. 5,000)

Revenue Taxes (Cr. 700,000)

Govt Wide

Same except for Gen revenue Property taxes (Cr. 700,000)

3. [Para. 6-b-3] Cash in the amount of the $75,000 premium on the bonds sold on January 1, 2017 was received and recorded in the debt service fund.

Required: Record this transaction in the debt service fund. No entry is required at this time in the governmental activities general journal since the bond issue, including the related premium and accrued interest, was recorded in the governmental activities general journal in transaction 5-a-1.

DSF

Cash (Dr. 75,000)

OFS Prem on Bond (Cr. 75,000)

4. [Para. 6-b-4] Temporary investments were purchased in the amount of $500,000.

Required: Record this transaction in both the debt service fund and governmental activities journals.

DSF

Investments Temp (Dr. 500,000)

Cash (Cr. 500,000)

5. [Para. 6-b-5] Checks were written and mailed to bondholders for interest payable on March 31, 2017.

Required: Record this transaction in both the debt service fund and governmental activities journals. In the governmental activities general journal, debit Accrued Interest Payable for the portion of these amounts expensed on December 31, 2016, the end of the preceding fiscal year.

DSF

Expenditures Bond Principal (Dr. 500,000)

Expenditures Bond Int (Dr. 100,000)

Cash (Cr. 600,000)

Govt

Current Portion of L/T Debt (Dr. 500,000)

Accrued int Payable L/T Debt (Dr. 100,000)

Cash (Cr. 600,000)

6. [Para. 6-b-6] Current taxes receivablewere collected in the amount of $675,000. Also, delinquent taxes receivable were collected in the amount of $10,000, along with Interest and Penalties Receivable on Taxes of $600.

Required: Record these transactions in both the debt service fund and governmental activities journals.

DSF

Cash (Dr. 685,600)

T/R Current (Cr. 675,000)

T/R Delinquent (Cr. 10,000)

T/R Penalties Rec (Cr. 600)

Govt

Same

7. [Para. 6-b-7] Interest on temporary investments was received in cash in the amount of $7,500.

Required: Record this transaction in both the debt service fund and governmental activities journals.

DSF

Cash (Dr. 7,500)

Rev Invest Income (Cr. 7,500)

Govt: Same

8. [Para. 6-b-8] Temporary investments amounting to $300,000 were sold at par.

Required: Record this transaction in both the debt service fund and governmental activities journals.

DSF

Cash (Dr. 300,000)

Investments Temp (Cr. 300,000)

Govt

Same

9. [Para. 6-b-9] On July 1, the debt service fund received $50,000 from the General Fund for interest payment on the 3% serial bonds. Checks were written and mailed to bondholders for all of the interest payments due July 1, 2017.

Required:Record the transfer in the debt service fund and the interest payment in both the debt service fund and governmental activities journals. At the government-wide level, $3,125 was debited for amortization of the premium on the 3% serial bonds.

DSF

Cash (Dr. 50,000)

OFS Interfund Trans in (Cr. 50,000)

Expenditures Bond Interest (Dr. 112,500)

Cash (Cr. 112,500)

Govt

Expenses + Interest on L/T Debt (Dr. 109,375)

Unamortized Prem on 3% Bond (Dr. 3,125)

Cash (Cr. 112,500)

10. [Para. 6-b-10] Cash to close the City Hall Annex Construction Fund was received in the amount of $7,000. (See Chapter 5, para. 5-a-18). The city council authorized a budget amendment for this unexpected transfer.

Required: Record the budget amendment and transfer in the debt service fund. This transaction involves two governmental funds, thus it has no effect on the governmental activities general journal.

DSF

Est OFS Interfund trans in (Dr. 7,000)

Budgetary Fund Balance (Cr. 7,000)

Cash (Dr. 7,000)

OFS Interfund Trans in (Cr. 7,000)

11. [Para. 6-b-11] On September 30, the debt service fund made the principal and interest payments associated with the 2% serial bond.

Required: Record this transaction in both the debt service fund and governmental activities journals.

12. [Para. 6-b-12] Theuncollected balance of current taxes receivableand the related estimated uncollectible account were reclassified as delinquent. Interest and penalties of $1,200 were accrued, of which $120 was estimated to be uncollectible.

Required: Record this transaction in both the debt service fund and governmental activities journals.

13. [Para. 6-b-13] At December 31, 2017, accrued interest expense on the two outstanding bond issues was recorded in the governmental activities general journal. Amortization of the premium on the 3% bonds sold was also recorded in the amount of $3,125.

Required: Record the accrual in the governmental activities journal.

Govt

Expense Interest on LT Debt (Dr. 109,375)

Unamortized Prem on serial Bond (Dr. 3,125)

Accrued Int Payable on LT Debt (Cr. 112,500)

14. Verify the accuracy of all your preceding journal entries in the debt service fund and governmental activities general journals, then click [Post Entries] of each entity to post the entries to the respective general ledgers. For the debt service fund only, make the entries needed to close the budgetary and operating statement accounts at the end of fiscal year 2017 and post them to the funds general ledger. (Note: You must click on the box for [Closing Entry] to check mark it; Closing Entry will appear in the [Transaction Description] box for the account being closed. Be sure the check mark is present for each account being closed.) Click [Post Entries] to post the closing entry. Closing entries will be made in the governmental activities general journal in Chapter 9 of this cumulative problem. Ignore those entries for now.