Question

As of the fiscal year ending December 31, 2014, Crystal Beach had $10,000,000 in 6 percent serial bonds outstanding. The serial bonds pay interest semiannually on April 1 and October 1, with $500,000 in bonds being retired each April 1. Resources for payment of interest are transferred from the General Fund, and the debt service fund levies property taxes annually to cover principal payments. Any excess is reserved for future debt service payments.  

Prepare debt service fundand governmental activitiesentries in general journal form to reflect, as necessary, the following information and transactions for FY 2015.

1. The operating budget for FY 2015 was recorded.

debt service fund

governmental activities

2. Property taxes in the amount of $500,000 were levied (no estimate for uncollectible accounts has been made).

debt service fund

governmental activities

3. Property taxes in the amount of $490,000 were collected.

debt service fund

governmental activities

4. Cash was received from the General Fund and checks were written and mailed for the April 1 principal and interest payments.

debt service fund

governmental activities

(5) Cash was received from the General Fund and checks were written and mailed for the September1 interest payments.    

debt service fund

governmental activities

Answer 1

Serial no.	Accounts and explanations	Debit ($)	Credit ($)
1	No entry is required for operating budget
2	Property taxes	500,000.00
	General fund		500,000.00
	(Being property taxes levied)
3	Bank	490,000.00
	Bad debt (500000 - 490000)	10,000.00
	Property taxes		500,000.00
	(Being property tax collected)
4	Interest on bond (10000000 x 6%) x 6/12	300,000.00
	6% Serial Bond	500,000.00
	Bank (300000 + 500000)		800,000.00
	(Being prinicpal and interest paid on April 1)
	General Fund	300,000.00
	Interest on bond (10000000 x 6%) x 6/12		300,000.00
	(Being interest written off against General fund)
5	Interest on bond (10000000 x 6%) x 6/12	300,000.00
	6% Serial Bond	500,000.00
	Bank (300000 + 500000)		800,000.00
	(Being prinicpal and interest paid on September 1)
	General Fund	300,000.00
	Interest on bond (10000000 x 6%) x 6/12		300,000.00
	(Being interest written off against General fund)