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 $40,000 premium be accounted for?

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 $40,000 premium be accounted for?

Quizplus · Accepted Answer

Premiums generated from the issuance of bonds for a capital projects fund must be used for debt service are generally transferred to the Debt Service Fund. The journal entry would for the debt service fund would be a debt to cash and a credit to Other Financing sources - Transfers In.

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