Chapter 6 Case Study DEBT SERVICE FUND: Serial Bond Example Background: The Town of Brighton voters approved a measure to add an extension to the local fire station expected to cost $2,520,000 (as discussed in Chapter 5). As partial financing of the project, the town issued regular serial bonds maturing in equal annual amounts over 20 years. The total face value of the bond was $2,320,000 bearing interest of 5%, payable semiannually on June 15 and December 15. The bonds were dated and sold on June 15, 2022 and the first principal payment will be due on June 15, 2023. The financing of the bond will come from a special sales tax recorded and collected directly in the debt service fund and $25,000 to be transferred from the Fire Station Capital Projects Fund. Required: Book journal entries for the following transactions: 1. INTEREST CALCULATION YEAR I: Calculate the semiannual interest payments on the bond. 2. The special sales tax for debt service is estimated to produce revenues of $55,000 and the transfer of S25,000 is expected to be received from the fire station capital projects fund. One interest payment will be made. Record the operating budget for the year ending December 31, 2022: Debt Service Fund: Governmental Activities: 3. Sales tax revenues in the amount of $52,500 are collected in cash. Debt Service Fund: Governmental Activities: 4. The Fire Station Capital Projects Fund transferred $25,000 of residual equity to the debt service fund. Debt Service Fund: Governmental Activities: 5. On December 15, 2022, the first interest payment is legally due, and checks totaling $58.000 are written to the registered owners of the bonds. Debt Service Fund: Governmental Activities: 6. As of December 31, 2022, all budgetary and operating statement accounts are closed to 'Fund Balance-Restricted (Debt Service Fund only). Interest was accrued at year-end, as applicable. Debt Service Fund: Governmental Activities: 7. INTEREST CALCULATION YEAR 2: Calculate total interest payments that will be made in year 2. NOTE: An amortization schedule will be helpful with this calculation. Debt Service Fund: Governmental Activities: 8. BUDGET YEAR 2: The special sales tax for debt service is estimated to produce revenues of S235,500 and two interest and one principal payment will be made. Record the operating budget for the year ending December 31, 2021 Debt Service Fund payment will be made. Record the operating budget for the year ending December 31, 2021. Debt Service Fund Governmental Activities: 9. Sales tax revenues in the amount of $233.400 are collected in cash. Debt Service Fund Governmental Activities: 10. On June 15, 2023, interest and principal payments were made to bondholders. Debt Service Fund: Governmental Activities: 11. On December 15, 2023, the semiannual interest payment was paid on schedule. Debt Service Fund: Governmental Activities: 12. As of December 31, 2023, all budgetary and operating statement accounts are closed to 'Fund Balance-Restricted (Debt Service Fund only). Interest was accrued at year-end, as applicable. Debt Service Fund: Governmental Activities: Chapter 6 Case Study DEBT SERVICE FUND: Serial Bond Example Background: The Town of Brighton voters approved a measure to add an extension to the local fire station expected to cost $2,520,000 (as discussed in Chapter 5). As partial financing of the project, the town issued regular serial bonds maturing in equal annual amounts over 20 years. The total face value of the bond was $2,320,000 bearing interest of 5%, payable semiannually on June 15 and December 15. The bonds were dated and sold on June 15, 2022 and the first principal payment will be due on June 15, 2023. The financing of the bond will come from a special sales tax recorded and collected directly in the debt service fund and $25,000 to be transferred from the Fire Station Capital Projects Fund. Required: Book journal entries for the following transactions: 1. INTEREST CALCULATION YEAR I: Calculate the semiannual interest payments on the bond. 2. The special sales tax for debt service is estimated to produce revenues of $55,000 and the transfer of S25,000 is expected to be received from the fire station capital projects fund. One interest payment will be made. Record the operating budget for the year ending December 31, 2022: Debt Service Fund: Governmental Activities: 3. Sales tax revenues in the amount of $52,500 are collected in cash. Debt Service Fund: Governmental Activities: 4. The Fire Station Capital Projects Fund transferred $25,000 of residual equity to the debt service fund. Debt Service Fund: Governmental Activities: 5. On December 15, 2022, the first interest payment is legally due, and checks totaling $58.000 are written to the registered owners of the bonds. Debt Service Fund: Governmental Activities: 6. As of December 31, 2022, all budgetary and operating statement accounts are closed to 'Fund Balance-Restricted (Debt Service Fund only). Interest was accrued at year-end, as applicable. Debt Service Fund: Governmental Activities: 7. INTEREST CALCULATION YEAR 2: Calculate total interest payments that will be made in year 2. NOTE: An amortization schedule will be helpful with this calculation. Debt Service Fund: Governmental Activities: 8. BUDGET YEAR 2: The special sales tax for debt service is estimated to produce revenues of S235,500 and two interest and one principal payment will be made. Record the operating budget for the year ending December 31, 2021 Debt Service Fund payment will be made. Record the operating budget for the year ending December 31, 2021. Debt Service Fund Governmental Activities: 9. Sales tax revenues in the amount of $233.400 are collected in cash. Debt Service Fund Governmental Activities: 10. On June 15, 2023, interest and principal payments were made to bondholders. Debt Service Fund: Governmental Activities: 11. On December 15, 2023, the semiannual interest payment was paid on schedule. Debt Service Fund: Governmental Activities: 12. As of December 31, 2023, all budgetary and operating statement accounts are closed to 'Fund Balance-Restricted (Debt Service Fund only). Interest was accrued at year-end, as applicable. Debt Service Fund: Governmental Activities