The voters in Ohio City approved the construction of a new city hall building and approved a $10 million bond issue with a stated rate of interest of 6 percent to fund the construction. When the bonds were issued, they sold for 99. Assuming that the city has agreed to transfer money from its general fund to make up the difference, what are appropriate entries related to the discount?
-In the capital projects fund
A) Debit Due from general fund $100,000; Credit Revenues $100,000.
B) Debit Due from general fund $100,000; Credit Other financing sources-nonreciprocal transfer-in $100,000; no other entries required.
C) Debit Other financing uses-nonreciprocal transfer-out $100,000; Credit Cash $100,000.
D) No entry in the capital projects fund.

Question

The voters in Ohio City approved the construction of a new city hall building and approved a $10 million bond issue with a stated rate of interest of 6 percent to fund the construction.  When the bonds were issued, they sold for 99.  Assuming that the city has agreed to transfer money from its general fund to make up the difference, what are appropriate entries related to the discount?
-In the capital projects fund
A) Debit Due from general fund $100,000; Credit Revenues $100,000.
B) Debit Due from general fund $100,000; Credit Other financing sources-nonreciprocal transfer-in $100,000; no other entries required.
C) Debit Other financing uses-nonreciprocal transfer-out $100,000; Credit Cash $100,000.
D) No entry in the capital projects fund.

Quizplus · Accepted Answer

The correct entry for a transfer from the general fund to the capital projects fund is to debit "Due from general fund" and credit "Other financing sources-nonreciprocal transfer-in." This reflects the receipt of funds from another fund without the expectation of repayment, which is not considered revenue but rather a financing source.

The Voters in Ohio City Approved the Construction of a New