Dayton County decided to refund an outstanding term bond issue in its Enterprise Fund. The old bonds have a par value of $3,200 and an unamortized premium of $120. These bonds are scheduled to mature in 6 more years.
Transactions:
1. On January 2, 20x2, the County issued refunding bonds at par, $3,700. The bonds bear interest at 5% payable annually and mature in five years. The bond issuance costs were $250.
2. On January 2, The County paid $3,800 into an irrevocable trust in order to defease in substance the previously outstanding bonds payable of the Enterprise Fund.
3. The annual interest payment on the new bonds was made on December 31 when due.
Requirements:
1. Prepare the journal entries required in an Enterprise. If no entry is required, state "No entry required" and explain why.
2. Indicate the effects of each transaction on the accounting equation of the Enterprise Fund accounts. If an element of the equation is not affected or if the net effect is zero, put "NE" in the appropriate box.

Question

Quizplus · Accepted Answer

The Answer of Dayton County decided to refund an outstanding term bond issue in its Enterprise Fund. The old bonds have a par value of $3,200 and an unamortized premium of $120. These bonds are scheduled to mature in 6 more years.
Transactions:
1. On January 2, 20x2, the County issued refunding bonds at par, $3,700. The bonds bear interest at 5% payable annually and mature in five years. The bond issuance costs were $250.
2. On January 2, The County paid $3,800 into an irrevocable trust in order to defease in substance the previously outstanding bonds payable of the Enterprise Fund.
3. The annual interest payment on the new bonds was made on December 31 when due.
Requirements:
1. Prepare the journal entries required in an Enterprise. If no entry is required, state "No entry required" and explain why.
2. Indicate the effects of each transaction on the accounting equation of the Enterprise Fund accounts. If an element of the equation is not affected or if the net effect is zero, put "NE" in the appropriate box.

Dayton County Decided to Refund an Outstanding Term Bond Issue