The City of New Haven issued $20 million of tax-supported bonds at 102 to finance a new jail. Upon issuance, how will the premium be recorded?

Question

Quizplus · Accepted Answer

The premium received from the issuance of bonds is considered an "other financing source" and is recorded in the debt service fund. Therefore, the premium will be recorded as a $400,000 other financing source in the debt service fund. In the governmental activities, the premium will be recorded as a "premium on bonds payable" and will increase the carrying amount of the bond liability by $400,000, resulting in a net bond liability of $20.4 million.

The City of New Haven Issued $20 Million of Tax-Supported