On July 1, 2022, the first day of its 2023 fiscal year, the Town of Bear Creek issued at par $5,300,000 of 8 percent term
On July 1, 2022, the first day of its 2023 fiscal year, the Town of Bear Creek issued at par $5,300,000 of 8 percent term bonds to renovate a historic wing of its main administrative building. The bonds mature in five years on July 1, 2027. Interest is payable semiannually on January 1 and July 1. As illustrated in the table below, a sinking fund is to be established with equal semiannual additions made on June 30 and December 31. Cash for the sinking fund additions and the semiannual interest payments will be transferred from the General Fund shortly before the due dates. Investment earnings are added to the investment principal.
| Fiscal Year | Period | Required Addition | Expected Earnings | Ending Balance | |
| 2023 | 1 | $ | 441,442 | | $ | 0 | | $ | 441,442 | | |
| | 2 | | 441,442 | | | 17,658 | | | 900,542 | | |
| 2024 | 3 | | 441,442 | | | 36,022 | | | 1,378,005 | | |
| | 4 | | 441,442 | | | 55,120 | | | 1,874,568 | | |
| 2025 | 5 | | 441,442 | | | 74,983 | | | 2,390,992 | | |
| | 6 | | 441,442 | | | 95,640 | | | 2,928,074 | | |
| 2026 | 7 | | 441,442 | | | 117,123 | | | 3,486,639 | | |
| | 8 | | 441,442 | | | 139,466 | | | 4,067,547 | | |
| 2027 | 9 | | 441,442 | | | 162,702 | | | 4,671,690 | | |
| | 10 | | 441,442 | | | 186,868 | | | 5,300,000 | | |
| |
Required
a-1. Prepare journal entries in the debt service fund for the following:
On July 1,2022 , record the budget for the fiscal year ended June 30,2023 . Include all interfund transfers to be received from the General Fund during the ear. An appropriation should be provided only for the interest payment due on January 1,2023. \begin{tabular}{|l|l|l|l|l|} \hline a & Term Bond Debt Service Fund & Record the budget for the fiscal year ended June 30,2023. & & \\ \hline & & Estimated Other Financing Sources & \\ \hline & & Estimated Revenues & \\ \hline & Appropriations & \\ \hline & Budgetary Fund Balance & \\ \hline & & & \\ \hline \end{tabular} On December 28,2022 , the General Fund transferred $653,442 to the debt service fund for an interest payment and sinking fund addition. The required addition to the sinking fund was immediately invested in 8 percent certificates of deposit. \begin{tabular}{|c|l|l|l|} \hline b1 & Term Bond Debt Service Fund & Record the transfer from the general fund to the debt service fund. \\ \hline & & Cash & \\ \hline & & Other Financing Sources-Interfund Transfers In \\ \hline & & & \\ \hline b2 & & Record the investment in the certificates of deposit. \\ \hline & & Investments & \\ \hline & & Cash & \\ \hline \end{tabular} On December 28, 2022, the city issued checks to bondholders for the interest payment due on January 1, 2023. \begin{tabular}{|l|l|l|l|l|} \hline c & Term Bond Debt Service Fund & Record the interest payment on the bond. & & \\ \hline & & Expenditures-Interest & \\ \hline & Cash & & & \\ \hline \end{tabular} . On June 27,2023 , the General Fund transferred $653,442 to the debt service fund. The addition for the sinking fund was invested immediately in 8 percent certificates of deposit. 1. On June 27,2023 , the General Fund transferred $653,442 to the debt service fund. The addition for the sinking fund was invested immediately in 8 percent certificates of deposit. \begin{tabular}{|c|l|l|l|} \hline d1 & Term Bond Debt Service Fund & Record the transfer from the general fund to the debt service fund. \\ \hline & & Cash & \\ \hline & & Other Financing Sources-Interfund Transfers In \\ \hline & & & \\ \hline d2 & & Record the investment in the certificates of deposit. \\ \hline & & Investments & \\ \hline & Cash & & \\ \hline & & & \\ \hline \end{tabular} . Actual interest earned on sinking fund investments at year-end (June 30,2023 ) was the same as the amount budgeted in the table. This interest adds to he sinking fund balance. \begin{tabular}{|l|l|l|l|l|} \hlinee & Term Bond Debt Service Fund & Record the actual interest earned on sinking fund investments. & \\ \hline & & Investments & \\ \hline & & Revenues-Investment Earnings \\ \hline \end{tabular} On July 1,2022 , record the budget for the fiscal year ended June 30,2023 . Include all interfund transfers to be received from the General Fund during the ear. An appropriation should be provided only for the interest payment due on January 1,2023. \begin{tabular}{|l|l|l|l|l|} \hline a & Term Bond Debt Service Fund & Record the budget for the fiscal year ended June 30,2023. & & \\ \hline & & Estimated Other Financing Sources & \\ \hline & & Estimated Revenues & \\ \hline & Appropriations & \\ \hline & Budgetary Fund Balance & \\ \hline & & & \\ \hline \end{tabular} On December 28,2022 , the General Fund transferred $653,442 to the debt service fund for an interest payment and sinking fund addition. The required addition to the sinking fund was immediately invested in 8 percent certificates of deposit. \begin{tabular}{|c|l|l|l|} \hline b1 & Term Bond Debt Service Fund & Record the transfer from the general fund to the debt service fund. \\ \hline & & Cash & \\ \hline & & Other Financing Sources-Interfund Transfers In \\ \hline & & & \\ \hline b2 & & Record the investment in the certificates of deposit. \\ \hline & & Investments & \\ \hline & & Cash & \\ \hline \end{tabular} On December 28, 2022, the city issued checks to bondholders for the interest payment due on January 1, 2023. \begin{tabular}{|l|l|l|l|l|} \hline c & Term Bond Debt Service Fund & Record the interest payment on the bond. & & \\ \hline & & Expenditures-Interest & \\ \hline & Cash & & & \\ \hline \end{tabular} . On June 27,2023 , the General Fund transferred $653,442 to the debt service fund. The addition for the sinking fund was invested immediately in 8 percent certificates of deposit. 1. On June 27,2023 , the General Fund transferred $653,442 to the debt service fund. The addition for the sinking fund was invested immediately in 8 percent certificates of deposit. \begin{tabular}{|c|l|l|l|} \hline d1 & Term Bond Debt Service Fund & Record the transfer from the general fund to the debt service fund. \\ \hline & & Cash & \\ \hline & & Other Financing Sources-Interfund Transfers In \\ \hline & & & \\ \hline d2 & & Record the investment in the certificates of deposit. \\ \hline & & Investments & \\ \hline & Cash & & \\ \hline & & & \\ \hline \end{tabular} . Actual interest earned on sinking fund investments at year-end (June 30,2023 ) was the same as the amount budgeted in the table. This interest adds to he sinking fund balance. \begin{tabular}{|l|l|l|l|l|} \hlinee & Term Bond Debt Service Fund & Record the actual interest earned on sinking fund investments. & \\ \hline & & Investments & \\ \hline & & Revenues-Investment Earnings \\ \hline \end{tabular}
