Question

The Village of Hawksbill issued $4,400,000 in 5 percent general obligation, tax-supported bonds on July 1, 2019, at 101. A fiscal agent is not used. Resources for principal and interest payments are to come from the General Fund. Interest payment dates are December 31 and June 30. The first of 20 annual principal payments is to be made June 30, 2020. Hawksbill has a calendar fiscal year.

1. A capital projects fund transferred the premium (in the amount of $44,000) to the debt service fund.

2. On December 31, 2019, funds in the amount of $110,000 were received from the General Fund and the first interest payment was made.

3.The books were closed for 2019.

4.On June 30, 2020, funds in the amount of $286,000 were received from the General Fund, and the second interest payment ($110,000) was made along with the first principal payment ($220,000).

5. On December 31, 2020, funds in the amount of $104,500 were received from the General Fund and the third interest payment was made (also in the amount of $104,500).

6.The books were closed for 2020.

Required:

a. Prepare journal entries to record the events above in the debt service fund.

b. Prepare a Statement of Revenues, Expenditures, and Changes in Fund Balance for the debt service fund for the year ended December 31, 2019.

c. Prepare a Statement of Revenues, Expenditures, and Changes in Fund Balance for the debt service fund for the year ended December 31, 2020.

Answer 1

Village of Harris Answer: Date Debits Credits Particulars 2019 No Entry For Bond Sale - recorded in the capital project fund 1. Dr $44.000 Cash Alc To Other Financing Sources-Transfers In Alc $44,000 (Capital projects fund transferred the premium to the debt service fund) Dr $1.10.000 Cash Alc To Other Financing Sources-Transfers In Alc (Funds received from the General funds) $1.10,000 $1.10.000 Expenditures-Interest Alc To Cash Alc (First interest payment was made) $1.10,000 $1,54.000 Other Financing Sources-Transfers In A/C | To Expenditures Interest Alc To Fund Balance Alc (Closing entry) $1.10.000 $44.000 2012 Dr $2.86,000 Cash Alc | To Other Financing Sources-Transfers In Alc (Funds received from General fund) $2.86.000 $1.10.000 $2,20,000 Expenditures - Interest Alc Expenditures - Principal Alc Dr To Cash Alc (Second interest payment was made along with principal) 4400000 /20 = 220000 $3,30,000 Dr $1.04.500 Cash Alc To Other Financing Sources-Transfers In Alc (Funds received from General fund) $1,04,500 $1.04.500 Expenditures Interest Alc To Cash Alc (Third interest payment was made along with principal) $1,04,500 $3,90,500 $44.000 Dr Other Financing Sources-Transfers In Alc Fund Balance A/C To Expenditures - Interest Alc To Expenditures - Principal Alc (Closing entry) $2.14.500 $2,20,000

Requirement 2 Answer: Statement of Revenues, Expenditures, and Changes In Fund Balance Year Ended December 31, 2019 Particulars Amount Revenues: Total Revenues Debt Service Expenditures: Interest Principal $1,10,000 Excess Of Revenues Over Expenditures -$1.10.000 Other Financing Sources: Transfers In: Total Change In Fund Balance Fund Balance-January 1, 2012 Fund Balance-December 31, 2012 $1,54,000 $44,000 $44.000 Requirement 3 Answer: Statement of Revenues, Expenditures, and Changes In Fund Balance Year Ended December 31, 2020 Particulars Amount Revenues: Total Revenues Debt Service Expenditures: Interest Principal $2.14,500 $2,20,000 Excess Of Revenues Over Expenditures -$4.34.500 Other Financing Sources: Transfers In: Total Change In Fund Balance Fund Balance-January 1, 2012 Fund Balance-December 31, 2012 $3,90,500 -$44.000 $44.000