The city of Montgomery issued $20 million of tax-supported bond at 102 to finance a new prison. Upon issuance, how will the premium be recorded?

1. A $400,000 revenue to the capital projects fund and a $400,000 revenue in governmental activities.
2. A $400,000 revenue to the debt service fund and a $400,000 premium on bonds payable in governmental activities
3. A $400,000 other financing source to the debt service fund and a $400,000 premium on bonds payable in governmental activities