To offset engineering and design costs incurred prior to the issuance of a long-term bond issue,a capital projects fund borrowed the sum of $75,000 on a short-term basis from First National Bank.This transaction should be recorded in:

Question

Quizplus · Accepted Answer

The borrowing of $75,000 on a short-term basis by the capital projects fund is a financing transaction and should be recorded in the capital projects fund as a liability. The purpose of the borrowing was specifically related to the capital projects fund and hence it is not appropriate to record it in the debt service fund or special revenue fund. Since it is not a long-term bond issue, it is not necessary to create a long-term liability in the general fund or any other governmental fund.

To Offset Engineering and Design Costs Incurred Prior to the Issuance