Salt City Issued $5 Billion of Bonds at Face Value

Salt City issued $5 billion of bonds at face value to fund the reconstruction of major interstate highways in and around the city. The bond underwriters withheld $2 million for underwriting fees and remitted the balance to the city. Assuming the city maintains its books and records in a manner that facilitates the preparation of fund financial statements, how should the underwriting fee be recorded in the capital projects fund?

A) Reduce other financing sources by $2 million.
B) Reduce bonds payable by $2 million.
C) Increase expenditures by $2 million.
D) It would not be accounted for in the capital projects fund.