Chapter 06 – Accounting for General Long–term Liabilities and Debt Service
6–25
Ch. 6, Solutions, 6-22 (Cont’d)
Debits Credits
6. Serial Bond Debt Service Fund:
BUDGETARY FUND BALANCE 20,000
APPROPRIATIONS 1,416,250
ESTIMATED OTHER FINANCING SOURCES 416,250
Chapter 06 – Accounting for General Long–term Liabilities and Debt Service
6–26
Ch. 6, Solutions, 6-22 (Cont’d)
b.
SANDY BEACH
DEBT SERVICE FUND
STATEMENT OF REVENUES, EXPENDITURES AND
CHANGES IN FUND BALANCE
FOR THE YEAR ENDED DECEMBER 31, 2017
REVENUES:
PROPERTY TAXES $1,020,000
EXPENDITURES:
BOND INTEREST $ 416,250
BOND PRINCIPAL 1,000,000
c. SANDY BEACH
DEBT SERVICE FUND
BALANCE SHEET
DECEMBER 31, 2017
ASSETS:
Chapter 06 – Accounting for General Long–term Liabilities and Debt Service
6–27
Ch. 6, Solutions, 6-22 (Cont’d)
General Problem Information: Serial bond debt service fund transactions and
statements
Learning Objective: 6-1
Topic: Types of Serial Bonds
Bloom’s Taxonomy: Apply
Accreditation Skills tag: AACSB: Knowledge Application, AICPA: FN Reporting
Level of Difficulty: Hard
6-23. a. SINKING FUND SCHEDULE FOR THE CITY OF NEVIN
FISCAL REQUIRED* EXPECTED ENDING
YEAR PERIOD ADDITION EARNINGS BALANCE
2017 1 $174,461 $ 0 $ 174,461
2 174,461 5,234 354,156
2018 3 174,461 10,625 539,242
b. CITY OF NEVIN DEBT SERVICE FUND
Debits Credits
(1) ESTIMATED OTHER FINANCING SOURCES 468,922
Chapter 06 – Accounting for General Long–term Liabilities and Debt Service
6–28
Ch. 6, Solutions, 6-23 (Cont’d) Debits Credits
(2) CASH 234,461
OTHER FINANCING SOURCES—INTERFUND
TRANSFERS IN 234,461
INVESTMENTS 174,461
CASH 174,461
General Problem Information: Term bond debt service fund transactions
Learning Objective: 6-6
Topic: Debt Service Accounting for Term Bonds
Bloom’s Taxonomy: Apply
Accreditation Skills tag: AACSB: Knowledge Application, AICPA: FN Reporting
Level of Difficulty: Hard
Chapter 06 – Accounting for General Long–term Liabilities and Debt Service
6–29
Ch. 6, Solutions (Cont’d)
6-24. JOURNAL ENTRIES
DEBT SERVICE FUND
CAPITAL PROJECTS FUND
GOVERNMENTAL ACTIVITIES
(a)
Est. Revenues
350,000
(a)
NO ENTRY
(a)
NO ENTRY
Appropriations
62,500
Budgetary Fund
Balance
287,500
(b)
NO ENTRY
(b)
Cash
1,000,000
(b)
NO ENTRY
OFS*—Interfund
Transfers In
1,000,000
(c)
NO ENTRY
(c)
Constr. Expenditures
200,000
(c)
CWIP**
200,000
Cash
200,000
Cash
200,000
(d)
NO ENTRY
(d)
Encumbrances
4,500,000
(d)
NO ENTRY
Encumbrances OS+
4,500,000
(e)
Cash
50,000
(e)
Cash
2,500,000
(e)
Cash
2,550,000
OFS—Premium
On Bonds
Payable
50,000
OFS—Proceeds
of Bonds
2,500,000
Premium on Bonds
Payable
50,000
Bonds Payable
2,500,000
Est. OFS—Premium
on Bonds
50,000
Budgetary Fund
Balance
50,000
(f)
NO ENTRY
(f)
Constr. Expenditures
50,000
(f)
CWIP
50,000
Cash
50,000
Cash
50,000
(g)
Expenditures—
Interest
62,500
(g)
NO ENTRY
(g)
Premium on Bonds
Payable (50,000/40)
1,250
Cash
62,500
Expenses—Interest
on Long-term debt
61,250
Cash
62,500
Chapter 06 – Accounting for General Long–term Liabilities and Debt Service
6–30
Ch. 6, Solutions, 6-24 (Cont’d)
DEBT SERVICE FUND
CAPITAL PROJECTS FUND
GOVERNMENTAL ACTIVITIES
(h)
Cash
350,000
(h)
NO ENTRY
(h)
Cash
350,000
Revenues
350,000
Gen. Rev.— Taxes
350,000
(i)
NO ENTRY
(i)
Encumbrances OS
2,500,000
(i)
CWIP
2,500,000
Constr. Expenditures
2,500,000
Contracts Payable
2,500,000
Encumbrances
2,500,000
Contracts Payable
2,500,000
(j)
NO ENTRY
(j)
Contracts Payable
2,500,000
(j)
Contracts Payable
2,500,000
CP—Retained %#
125,000
CP—Retained %
125,000
Cash
2,375,000
Cash
2,375,000
(k)
NO ENTRY
(k)
Cash
1,500,000
(k)
Cash
1,500,000
Revenues
1,500,000
Prog Rev—Gen.
Govt.—Cap.
Grant/Contrib.
1,500,000
(l)
Appropriations
62,500
(l)
Revenues
1,500,000
(l)
NOT REQUIRED
FOR PROBLEM
Budgetary Fund
Balance
337,500
OFS—Interfund
Transfers In
1,000,000
Est. Revenues
350,000
OFS—Proceeds of
Bonds
2,500,000
Est. OFS—
Premium on
Bonds
50,000
Constr.
Expenditures
2,750,000
Fund Balance—
Restricted
1,250,000
Revenues
350,000
Fund Balance—
Assigned
1,000,000
OFS—Premium
on Bonds
50,000
Expenditures—
Interest
62,500
Fund Balance—
Restricted
337,500
# CP—Retained % = Contracts Payable—Retained Percentage
Chapter 06 – Accounting for General Long–term Liabilities and Debt Service
6–31
Ch. 6, Solutions, 6-24 (Cont’d)
DEBT SERVICE FUND
CAPITAL PROJECTS FUND
GOVERNMENTAL ACTIVITIES
(m)
Est. Revenues
300,000
(m)
NO ENTRY
(m)
NO ENTRY
Budgetary Fund
Balance
68,750
Appropriations&
368,750
(n)
Cash
250,000
(n)
NO ENTRY
(n)
Cash
250,000
Revenues
250,000
Gen. Rev.— Taxes
250,000
(o)
NO ENTRY
(o)
Encumbrances OS
2,000,000
(o)
CWIP
2,000,000
Constr. Expenditures
2,000,000
Contracts Payable
2,000,000
Encumbrances
2,000,000
Contracts Payable
2,000,000
(p)
NO ENTRY
(p)
Constr. Expenditures
130,000
(p)
CWIP***
130,000
Cash
130,000
Cash
130,000
(q)
NO ENTRY
(q)
Contacts Payable
2,000,000
(q)
Contacts Payable
2,000,000
CP—Retained %
125,000
CP—Retained %
125,000
Cash
2,125,000
Cash
2,125,000
(r)
Expenditures—
Interest
62,500
(r)
NO ENTRY
(r)
Premium on Bonds
Payable
1,250
Expenditures—
Principal
250,000
Expenses—Interest
61,250
Cash
312,500
Bonds Payable
250,000
Cash
312,500
&The appropriation includes a principal payment of $250,000, a semi-annual interest payment of $62,500 ($2,500,000*.05*1/2) and a semi-annual interest
payment of $56,250 ([$2,500,000-250,000]*.05*1/2).
Chapter 06 – Accounting for General Long–term Liabilities and Debt Service
6–32
Ch. 6, Solutions, 6-24 (Cont’d)
DEBT SERVICE FUND
CAPITAL PROJECTS FUND
GOVERNMENTAL ACTIVITIES
(s)
Cash
120,000
(s)
Fund Balance—
Restricted
1,250,000
(s)
Buildings
4,750,000
OFS—Interfund
Transfers In
120,000
Fund Balance—
Assigned
880,000
Improvements Other
than Buildings
130,000
Construction
Expenditures
2,130,000
CWIP
4,880,000
Est. OFS—Interfund
Transfers In
120,000
Budgetary Fund
Balance
120,000
OFU—Interfund
Transfers Out
120,000
Cash
120,000
Fund Balance—
Assigned
120,000
OFU—Interfund
Transfers Out
120,000
Note: The resources provided to the Capital Projects Fund include restricted and assigned amounts. The bond proceeds and grant funds are restricted, while the
interfund transfer was assigned for the historical renovation. It is assumed restricted funds are spent first, when available, explaining why restricted fund balance was
used first.
General Problem Information: Comprehensive capital assets/serial bond problem
Learning Objective: 6-2
Learning Objective: 6-6
Topic: Debt Service Funds
Bloom’s Taxonomy: Apply
Accreditation Skills tag: AACSB: Knowledge Application; AICPA: Critical Thinking, FN Reporting
Level of Difficulty: Hard