Voters in Lincoln School District approved the construction of a new high school and approved an $8 million bond issue with a stated rate of interest of 6 percent to fund the construction. Bids were received, and the low bid was $8 million. When the bonds were issued, they sold for face value less bond underwriting fees of $0.5 million. The school board voted to fund the balance of the construction by a transfer from the general fund.
-The entry in the capital projects fund to record the receipt of the bond proceeds should be
A) Debit Cash $7.5 million; Credit Bonds payable $7.5.
B) Debit Cash $7.5 million; Credit Other financing sources $7.5.
C) Debit Cash $7.5 million and Expenditures $0.5 million; Credit Bonds payable $8 million.
D) Debit Cash $7.5 million and Expenditures $0.5 million; Credit Other financing sources $8 million.

Question

Voters in Lincoln School District approved the construction of a new high school and approved an $8 million bond issue with a stated rate of interest of 6 percent to fund the construction.   Bids were received, and the low bid was $8 million.  When the bonds were issued, they sold for face value less bond underwriting fees of $0.5 million.   The school board voted to fund the balance of the construction by a transfer from the general fund.  
-The entry in the capital projects fund to record the receipt of the bond proceeds should be
A) Debit Cash $7.5 million; Credit Bonds payable $7.5.
B) Debit Cash $7.5 million; Credit Other financing sources $7.5.
C) Debit Cash $7.5 million and Expenditures $0.5 million; Credit Bonds payable $8 million.
D) Debit Cash $7.5 million and Expenditures $0.5 million; Credit Other financing sources $8 million.

Quizplus · Accepted Answer

The entry should reflect the cash received ($7.5 million) and the underwriting fees as expenditures, with the full bond amount credited to other financing sources.

Voters in Lincoln School District Approved the Construction of a New