When bonds are sold at a premium for a capital project, the premium amount generally:
A) Increases the cash available to the capital projects fund.
B) Is transferred to the debt service fund.
C) Is applied against the principal balance by the fiduciary agent.
D) Is recorded in a fiduciary fund since it does not belong to the capital projects fund.

Question

Quizplus · Accepted Answer

When bonds are sold at a premium, the premium amount is typically transferred to the debt service fund. This is because the premium can be used to pay future interest or principal on the bonds, thus reducing the overall cost of borrowing for the entity.

When Bonds Are Sold at a Premium for a Capital