Question

On January 1, 2025, Blossom issued $860,000 of 9% serial bonds at par. Semiannual interest is payable on January 1 and July 1 and principal of $86,000 matures each January 1 starting in 2026. The debt will be serviced through a special tax levy designed especially for this purpose. Therefore, transfers will be provided as needed from the Special Revenue Fund.

The following transactions occurred relating to the Debt Service Fund.

2025

June 29

July 1

Dec. 18

2026

Jan. 1

2035

Jan. 2

A transfer of $38,700 was received from the Special Revenue Fund.

The semiannual interest payment was made.

A Special Revenue Fund transfer of $22,000 was received.

A payment on bond principal and semiannual interest was made.

Jan. 4

Accumulations in the Debt Service Fund amounted to $54,000 in investments and $37,000 in cash. The investments were liquidated at face value and the final interest and principal payment was made.

Having served its purpose, the Debt Service Fund's remaining assets were transferred to the Special Revenue Fund:

Prepare the journal entries necessary to record the foregoing transactions. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. List all debit

Answer 1

2025

• June 29: A transfer of $38,700 was received from the Special Revenue Fund.
  Debit: Debt Service Fund $38,700
  Credit: Special Revenue Fund $38,700
  
  
  

• July 1: The semiannual interest payment was made.
  Debit: Interest Expense $38,700
  Credit: Cash $38,700

• December 18: A Special Revenue Fund transfer of $22,000 was received.
  Debit: Debt Service Fund $22,000
  Credit: Special Revenue Fund $22,000

2026

January 1: A payment on bond principal and semiannual interest was made.

Debit: Bond Principal $64,000
Debit: Interest Expense $38,700
Credit: Cash $102,700 

2035

January 2: Accumulations in the Debt Service Fund amounted to $54,000 in investments and $37,000 in cash. The investments were liquidated at face value, and the final interest and principal payment was made.
Debit: Investments (at face value) $54,000

Debit: Bond Principal $86,000

Debit: Interest Expense $38,700
Credit: Cash $178,700

Having served its purpose, the Debt Service Fund's remaining assets were transferred to the Special Revenue Fund:

Debit: Special Revenue Fund $178,700
Credit: Debt Service Fund $178,700