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Sugar City Issued $2 Million of Bonds to Fund the Construction

Question 22

Multiple Choice

Sugar City issued $2 million of bonds to fund the construction of a new city office building.The bonds have a stated rate of interest of 5 percent and were sold at 101.Which of the following entries should be made in the capital projects fund to record this event?

A) Debit Cash $2.02 million; Credit Bonds payable $2 million and Premium on bonds payable $0.02 million.
B) Debit Cash $2.02 million; Credit Bonds payable $2 million and Other financing sources $0.02 million.
C) Debit Cash $2.02 million; Credit Other financing sources $2.02 million.
D) Debit Cash $2.02 million; Credit Other financing sources $2 million and Revenue $0.02 million.
Use the following information to answer questions 8 and 9
Voters in Lincoln School District approved the construction of a new high school and approved an $8 million bond issue with a stated rate of interest of 6 percent to fund the construction.Bids were received and the low bid was $8 million.When the bonds were issued, they sold for face value less bond underwriting fees of $0.5 million.The school board voted to fund the balance of the construction by a transfer from the general fund.

Correct Answer: