Previously Atomic City had issued bonds with a face value of $10 million to construct a new city hall.Because the money will not be needed for several months, the city invested the bond proceeds in U.S.Government securities.Assuming that the city maintains its books and records in a manner that facilitates the preparation of the fund financial statements, what is the appropriate entry when the City receives interest on the investments?
A) Debit Cash; Credit Revenue.
B) Debit Cash; Credit Other financing source
C) Debit Cash; Credit Deferred revenue
D) No entry required.

Question

Quizplus · Accepted Answer

When the City receives interest on the investments, it should be recorded as revenue in the funds financial statements. Therefore, the appropriate entry is to debit cash and credit revenue.

Previously Atomic City Had Issued Bonds with a Face Value