The Town of Windsor issued the following during the year: (1) $600,000 in bonds for the installation of street lights, to be assessed against properties benefited, but secondarily backed by the town; (2) $800,000 in bonds for construction of a public golf course to be self-supported from fees collected from golf course users. How much should be accounted for through debt service funds for payments of principal over the life of the bonds?
A) $0.
B) $600,000.
C) $800,000.
D) $1,400,000.

Question

The Town of Windsor issued the following during the year: (1) $600,000 in bonds for the installation of street lights, to be assessed against properties benefited, but secondarily backed by the town; (2) $800,000 in bonds for construction of a public golf course to be self-supported from fees collected from golf course users. How much should be accounted for through debt service funds for payments of principal over the life of the bonds? 
A) $0.
B) $600,000.
C) $800,000.
D) $1,400,000.

Quizplus · Accepted Answer

Debt service funds are used for the repayment of general long-term debt principal and interest. The $600,000 in bonds for street lights, although initially assessed against properties, are secondarily backed by the town, indicating a general obligation of the town, thus accounted for through debt service funds. The $800,000 in bonds for the golf course are to be self-supported by fees and do not require debt service fund accounting as they are not a general obligation of the town.

The Town of Windsor Issued the Following During the Year