Harvey City Comprehensive Case DEBT SERVICE FUNDS Harvey City has two Debt Service Funds in 20X4. The City Hall Bonds Debt Service Fund was established several years ago when bonds were issued to finance construction of a new city hall. Debt service on these bonds has been accomplished with transfers of unassigned General Fund resources in the past. State law requires all bonded debt service to be reported in a Debt Service Fund. Harvey City decided to refund the City Hall bonds in 20X4. The General Debt Service Fund is used to account for debt service on several small bond issues. It is financed by a combination of taxes restricted for debt service and General Fund transfers of unassigned resources.

REQUIREMENTSCITY HALL BONDS DEBT SERVICE FUND Prepare a worksheet for the City Hall Bonds Debt Service Fund similar to the General Fund worksheet you created in Chapter 4. Enter the effects of the following transactions and events in the appropriate columns of the worksheet. (A different solution approach may be used if desired by your professor.)

Enter the preclosing trial balance in the appropriate worksheet columns.

Enter the preclosing trial balance amounts in the closing entry (operating statement data) and postclosing trial balance (balance sheet data) columns, as appropriate.

Prepare the 20X4 Statement of Revenues, Expenditures, and Changes in Fund Balance for the City Hall Bonds Debt Service Fund.

TRANSACTIONS AND EVENTS20X4CITY HALL BONDS DEBT SERVICE FUND The city issued $3,000,000 of city hall refunding bonds at par on July 1. The refunding bonds are 5-year bonds and pay interest semiannually each July 1 and January 1. The refunding bonds bear interest of 6% per year. The proceeds of the refunding bonds will provide part of the financing for an in-substance defeasance of $3,200,000 (face value) of original city hall bonds that were issued several years earlier. An unamortized premium of $180,000 is associated with the original city hall bonds, which mature in 8 years. The original city hall bonds bear interest of 8%, payable semiannually each June 30 and December 31.

The city transferred $729,965 from the General Fund to the City Hall Bonds Debt Service Fund to provide for payment of interest on the original city hall bonds and to help finance the refunding of those original city hall bonds.

The city paid the interest ($128,000) on the original city hall bonds when due on June 30.

The city paid $3,601,965 into an irrevocable trust to defease the original city hall bonds. The trust meets all the requirements for a defeasance in substance.

REQUIREMENTSGENERAL DEBT SERVICE FUND Prepare a worksheet for the General Debt Service Fund similar to the General Fund worksheet you created in Chapter 4. Enter the effects of the following transactions and events in the appropriate columns of the worksheet. (A different solution approach may be used if desired by your professor.)

Enter the preclosing trial balance in the appropriate worksheet columns.

Enter the preclosing trial balance amounts in the closing entry (operating statement data) and postclosing trial balance (balance sheet data) columns, as appropriate.

Prepare the 20X4 Statement of Revenues, Expenditures, and Changes in Fund Balance for the General Debt Service Fund.

Prepare the 20X4 year-end balance sheet for the General Debt Service Fund. (All resources of this fund, except from investment income, are restricted for debt service.)

BEGINNING 20X4 TRIAL BALANCE The trial balance of the General Debt Service Fund at January 1, 20X4, is:

Harvey City

General Debt Service Fund

Trial Balance

January 1, 20X4

Debit Credit

Cash 171,350

Investments 1,237,000

Taxes ReceivableDelinquent 52,000

Allowance for Uncollectible TaxesDelinquent 5,800

Interest and Penalties Receivable 10,900

Allowance for Uncollectible Interest and Penalties 3,500

Deferred Revenues 50,000

Fund Balance - 1,411,950

Total $1,471,250 $1,471,250

The fund balance is restricted.

TRANSACTIONS AND EVENTS20X4GENERAL DEBT SERVICE FUND The city levied $300,000 of special property taxes that are restricted by statute and by bond indentures for the servicing of general obligation bonds. One percent (1%) of the taxes is expected to be uncollectible.

The city collected $246,800 of property taxes before the due date for taxes. The remainder of the taxes receivable became delinquent.

The city levied interest and penalties of $6,650 on the overdue taxes receivable. $1,370 of the interest and penalties is expected to prove uncollectible. The interest and penalties on taxes are restricted for debt service as well.

The city collected $41,040 of delinquent taxes and $5,130 of interest and penalties receivable.

The city wrote off uncollectible taxes receivable of $4,370 and related interest and penalties of $1,370.

Investments that cost $1,000,000 were sold for $1,050,000. Investment income is not restricted, but is retained in the fund to be used for debt service if needed.

The city paid interest of $800,000 on bonds payable and retired $500,000 of principal.

$45,050 of the December 31, 20X4, balance of delinquent taxes receivable and $6,950 of the December 31, 20X4, balance of interest and penalties receivable are not expected to be collected within the first 60 days of 20X5. (The January 1, 20X4, delinquent taxes receivable balance included $43,100 of taxes that were collected after the first 60 days of 20X4, and the January 1, 20X4, interest and penalties receivable balance included $6,900 of interest and penalties on taxes that were collected after the first 60 days of 20X4.) (Hint: Deferred revenues must be adjusted.)

The fair value of investments at year end was $254,000.

he