Question

The following transaction refers to one of the Districts

            a.    The District issues general obligation bonds in the amount of K900,000, receiving cash for the full-face amount of the bonds. The cash will be used to buy capital assets.

            b.   The District buys a prefabricated building for K750, 000, using part of the bond proceeds. The building is delivered and the invoice for the building is approved.

            c.    The invoice approved in b. is paid.

            d.   The General Fund transfers cash of K55,000 to another fund in anticipation of the payment of the first installment of interest (K30,000) and principal (K25,000) on the debt.

            e.    The first installment of debt service on bonds issued in ‘a’ becomes due and payable.

            f.    Debt service on the bonds issued in a. is paid.

Required

1. Prepare entries to record the above transactions related to acquisition of capital assets by a district. Identify the fund(s) used. The District does not use encumbrance accounting (3.5 Marks)
2. Prepare entries to record the above transactions related to acquisition of capital assets by a district. Identify the fund(s) used. The District uses encumbrance accounting (4 Marks)

Answer 1

Cash Alc K900,000 k 900,000 To District bonds (Being bonds issued) bec. er K750,000 Building Ala s To cash ale Being Building purchased K 750,000 K55,000 d 155,000 General Fund to Another Find (Being amt transferred) K55,000 e K55,000 first installment or To Que payable (Being principal e interest payable) K55,000 f. Due payable To Cash Ale K55,000 (Being cash paid)