Advanced Accounting 11th Edition by Paul Fischer,William Tayler, Rita Cheng

Exercise 22

Journal entries, general long-term debt. The following transactions directly affected Rose City's general fund and other governmental funds. Prepare journal entries to reflect their impact upon the general long-term debt account group.
1. Rose City employees earned $8.8 million in vacation pay during the year, of which they took only $6.6 million. They may take the balance in the following three years.
2. The employees took $0.4 million of vacation pay that they had earned in previous years.
3. Rose City settled a claim brought against it during the year by a building contractor. The city agreed to pay $7.5 million immediately and $11 million at the end of the following year.
4. Rose City issued $100 million in general obligation bonds at a price of $99.8 million-i.e., a discount of $0.2 million.
5. Rose City transferred $5 million from the general fund to the debt service fund. Of this, $4 million was for the first payment of interest; the balance was for repayment of principal.
6. Rose City earned $0.3 million in interest on investments held in the debt service fund. These investments have a fair value $4.5 million greater than at the end of last period. The funds are available for the repayment of debt principal.