During the fiscal year ended December $31,2024,$ the City of Johnstown issued $5\%$ general obligation serial bonds in the amount of $$2,000,000$ at $102($$$2,040,000)$ and used $$1,990,000$ of the proceeds to construct a fire station. The $$40,000$ premium was transferred to a debt service fund. The $$10,000$ left in the capital projects fund at the end of the project was later transferred to the debt service fund. The bonds were dated April $1,2024$ and paid interest on October $1$ and April $1.$ The first of $10$ equal annual principal payments was due on April $1,2025.$

How would the bond premium be recorded at the time of the bond sale?

As an other financing use in the capital projects fund.

As a liability in the debt service fund.

As a liability in the capital projects fund.

As an other financing use in the debt service fund.