Use the following information to answer questions
Voters in Phillips City approved the construction of a new city hall building and approved a $5 million bond issue with a stated rate of interest of 6% to fund the construction.When the bonds were issued, they sold for 101.What are appropriate entries related to the premium?
-In the capital projects fund
A)Debit Cash $50,000; Credit Revenues $50,000; no other entries required.
B)Debit Cash $50,000; Credit Other financing sources-transfer $50,000; No other entries required.
C)Debit Cash $50,000; Credit Revenues; ALSO
Debit Other financing uses-transfer $50,000; Credit Cash $50,000.
D)Debit Cash $50,000; Credit Other financing sources-Bond premium $50,000; ALSO
Debit Other financing uses-transfer $50,000; Credit Cash $50,000.

Question

Use the following information to answer questions 
Voters in Phillips City approved the construction of a new city hall building and approved a $5 million bond issue with a stated rate of interest of 6% to fund the construction.When the bonds were issued, they sold for 101.What are appropriate entries related to the premium?
-In the capital projects fund
A)Debit Cash $50,000; Credit Revenues $50,000; no other entries required.
B)Debit Cash $50,000; Credit Other financing sources-transfer $50,000; No other entries required.
C)Debit Cash $50,000; Credit Revenues; ALSO
Debit Other financing uses-transfer $50,000; Credit Cash $50,000.
D)Debit Cash $50,000; Credit Other financing sources-Bond premium $50,000; ALSO
Debit Other financing uses-transfer $50,000; Credit Cash $50,000.

Quizplus · Accepted Answer

This entry reflects the issuance of the bonds at a premium. The Capital Projects Fund receives the proceeds of the bond issue in the form of cash, and records the cash received with a debit to Cash. The Capital Projects Fund also records the premium received from the sale of the bonds with a credit to Other financing sources-Bond premium. The Capital Projects Fund then transfers the premium to the Debt Service Fund, which is used to pay the principal and interest on the bonds. This transfer is recorded with a debit to Other financing uses-transfer and a credit to Cash.

Use the Following Information to Answer Questions