The City of Armona Has Decided to Refinance $8,000 Par $\underline{\text{ Requirements: }}$

The City of Armona has decided to refinance $8,000 par value of general government, general obligation bonds outstanding. The bonds had a related unamortized bond premium of $200. The city issues $6,000 of refunding bonds and transfers $2,700 from the General Fund to the Debt Service Fund. The city paid $8,700 from the Debt Service Fund into an irrevocable trust to cover future payments on the original bonds. All amounts are in thousands of dollars.
$\underline{\text{ Requirements: }}$
1. Record the above transactions in the Debt Service Fund assuming the refinancing meets the conditions for treatment as a defeasance in substance.
2. Record the above transactions in the Debt Service Fund assuming the refinancing does not meet the conditions for treatment as a defeasance in substance.
3. For both requirements (1) and (2), indicate the effects of each transaction on the accounting equation of the Debt Service Fund and on the General Capital Assets and General Long-Term Liabilities accounts. If an element is not affected, put "NE" in the appropriate box.