During the fiscal year ended December 31, 2017, the City of Johnstown issued 6% general obligation serial bonds in the amount of $2,000,000 at 102 $2,040,000) and used $1,980,000 of the proceeds to construct a fire station. The $40,000 premium was transferred to a debt service fund. The $20,000 left in the capital projects fund at the end of the project was later transferred to the debt service fund. The bonds were dated April 1, 2017 and paid interest on October 1 and April 1. The first of 10 equal annual principal payments was due on April 1, 2018.
-How would the bond sale be recorded?

Question

During the fiscal year ended December 31, 2017, the City of Johnstown issued 6% general obligation serial bonds in the amount of $2,000,000 at 102 $2,040,000) and used $1,980,000 of the proceeds to construct a fire station.  The $40,000 premium was transferred to a debt service fund.  The $20,000 left in the capital projects fund at the end of the project was later transferred to the debt service fund.  The bonds were dated April 1, 2017 and paid interest on October 1 and April 1.  The first of 10 equal annual principal payments was due on April 1, 2018. 
-How would the bond sale be recorded?

Quizplus · Accepted Answer

Proceeds of a debt issue would be recorded in the capital projects fund. The journal entry would be a debit to cash for $2,040,000 and credits to Other Financing Sources - Proceeds of Bonds for $2,000,000 and Other Financing Sources - Premium on Bonds for $40,000.

During the Fiscal Year Ended December 31, 2017, the City