A state government has 5% bonds that it issued a few years ago. The bonds were issued at par and are carried at $10 million. Because current interest rates are significantly lower, the state refunds these bonds by issuing new bonds at 2%. The 5% bonds require a call premium of $200,000, and the state issues new bonds at par, $10,200,000.
Required
a. The bonds are general obligation debt, used to fund the activities of the general fund. Prepare the journal entry or entries to record the issuance of the 2% bonds and refunding of the 5% bonds.
b. The bonds are the obligation of an enterprise fund. Prepare the journal entry or entries to record the issuance of the 2% bonds and refunding of the 5% bonds.

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The Answer of A state government has 5% bonds that it issued a few years ago. The bonds were issued at par and are carried at $10 million. Because current interest rates are significantly lower, the state refunds these bonds by issuing new bonds at 2%. The 5% bonds require a call premium of $200,000, and the state issues new bonds at par, $10,200,000.
Required
a. The bonds are general obligation debt, used to fund the activities of the general fund. Prepare the journal entry or entries to record the issuance of the 2% bonds and refunding of the 5% bonds.
b. The bonds are the obligation of an enterprise fund. Prepare the journal entry or entries to record the issuance of the 2% bonds and refunding of the 5% bonds.

A State Government Has 5% Bonds That It Issued a Few