Question

The City of Oxford, Mississippi (population just under 24,000) passed a bond issue for $2,500,000, 4.5 percent, semiannual interest, 10 year bonds to finance the construction of a second high school to be called Yoknapatawpha High, named in memory of the Pulitzer Prize winning author, William Faulkner. The State also contributed $110,000 for construction of the gymnasium. The contractor selected then submitted her contract for $2,080,000 to commence on January 2, 2019, with the project’s estimated completion in late 2019.

1. Prior to the receipt of the bond proceeds, Oxford needed funds and went to United Southern Bank to borrow $600,000 in bond anticipation notes (BANs), at 5 percent, which were to be paid back using the proceeds of the $2,500,000 bond issue. The entry at the government-wide level to record the receipt of the bond anticipation notes would include a:

A. Credit to Other Financing Sources—proceeds of BANs, $600,000.

B. Debit to Cash, $1,900,000.

C. Credit to Bonds Payable, $600,000.

D. Debit to Cash, $600,000.

Answer 1

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Answer is highlighted in yellow: Solution: D. Debit to Cash, $600,000 Answer: Explanation Entry will be Debit to Cash 600000 Credit to Bond anticipated notes payable 600000 It is standardized.