The City of Amarillo is authorized to issue $8,400,000, 4 percent regular serial
ID: 2417622 • Letter: T
Question
The City of Amarillo is authorized to issue $8,400,000, 4 percent regular serial bonds in 2017 for the construction a new exit off the interstate highway within city limits. The bonds mature in equal annual amounts beginning on January 1, 2018 for 10 years and pay interest on January 1 and July 1. The city is required to use all accrued interest and premiums to service the debt. The funds to pay the interest will be transferred from the General Fund. The county’s fiscal year end is December 31.
a. Prepare the budgetary entries for 2017 assuming that the bonds were scheduled to be issued on January 2. Assume that the January 1, 2018 principal and interest payments will be included in the 2018 budget.
b. The bonds were sold on February 1, 2017 at 101. Prepare the journal entries needed to record the issuance of the bonds, including the entries required in the debt service fund and any entries required in the governmental activities general ledger at the government-wide level.
c. Prepare the entry required to reflect the transfer of funds from the General Fund in the debt service fund. (You may ignore the entry in the General Fund.)
d. Prepare the journal entries needed to record first interest payment made on July 1, including the entries required in the debt service fund and any entries required in the governmental activities general ledger at the government-wide level. Assume that the straight-line method is used for premium amortization.
Explanation / Answer
Date Accounts Title Dr Cr a jan 2 2017 Cash $8,400,000 Serial Bonds Payable $8,400,000 Jan 1,2018 Estimated Other Financing Sources $1,008,000 Appropriation $1,008,000 (Principal & Interest 8400000/10=840000 and 8400000*.04*6/12) Due from General Fund $1,008,000 OFS-Interfund Transfer In $1,008,000 Cash $1,008,000 Due From General Fund $1,008,000 (Cash transferred from Journal Fund) Expenses-Interest On Bond $168,000 Expenses-Bond Principle $840,000 Cash $1,008,000 31c,2018 Expenses-Interest On Bond Accured Interest Payable 126000 ($8400000-840000(1 year payment)*.04*5/12) 126000 b & C d jan 2 2017 Cash 8484000 Serial Bonds Payable (8400000/100*101) 8400000 Premium on Bonds payable 840000 1-Jul Estimated Other Financing Sources 140000 Appropriation $140,000 Interest 8400000*.04*5/12) Due from General Fund $140,000 OFS-Interfund Transfer In $140,000 Cash $140,000 Due From General Fund $140,000 (Cash transferred from Journal Fund) Expenses-Interest On Bond $131,600 Premium on Bond Payable $8,400 Cash $140,000