Chapter 06 – Accounting for General Long-term Liabilities and Debt Service
6-18
Ch. 6, Solutions, Exercise 6-19 (Cont’d)
Debits Credits
b. Debt Service Fund:
CASH 100,000
OTHER FINANCING SOURCES—PREMIUM
ON BONDS ($8,000,000 × .01) 80,000
REVENUES 20,000
Governmental Activities:
c. Calculation of Interfund Transfer to Debt Service Fund:
Amount of appropriation required for the interest
payment due on July 1 $120,000
Debt Service Fund:
d. Debt Service Fund:
Chapter 06 – Accounting for General Long-term Liabilities and Debt Service
6-19
Ch. 6, Solutions, Exercise 6-19, part d (Cont’d)
Debits Credits
Governmental Activities:
ACCRUED INTEREST PAYABLE 20,000
PREMIUM ON BONDS PAYABLE
e. The debt service fund would need to adjust its budget to account for the
premium and accrued interest received. These amounts will reduce the
General Problem Information: Budgeted and actual debt service transactions
Learning Objective: 6-2, 6–5
Topic: Various chapter topics
Bloom’s Taxonomy: Apply
Accreditation Skills tag: AACSB: Knowledge Application, AICPA: FN Reporting
Level of Difficulty: Medium
6-20. a. MCCORMICK COUNTY
Debits Credits
Capital Projects Fund:
Chapter 06 – Accounting for General Long-term Liabilities and Debt Service
6-20
Ch. 6, Solutions, Exercise 6-20, part a (Cont’d)
Debits Credits
Governmental Activities:
BUILDINGS 3,348,829
LEASE OBLIGATIONS PAYABLE 2,598,829
b. Debt Service Fund:
EXPENDITURES⎯INTEREST ON LEASE
OBLIGATION 155,930
Calculation: Interest Payment Unpaid
Payment Amount of on Unpaid on Lease
Number Payment Balance at 6% Principal Obligation
c. The asset and long-term liability would be reflected only on the
Chapter 06 – Accounting for General Long-term Liabilities and Debt Service
6-21
Ch. 6, Solutions, Exercise 6-20 (Cont’d)
General Problem Information: Lease accounting
Learning Objective: 6-5
Topic: Use of Debt Service Funds to Record Lease Payments
Bloom’s Taxonomy: Apply
Accreditation Skills tag: AACSB: Knowledge Application, AICPA: FN Reporting
Level of Difficulty: Medium
6-21. CITY OF APPLETON
STATEMENT OF LEGAL DEBT MARGIN
DECEMBER 31
ASSESSED VALUE OF PROPERTY $240,000,000
RATE OF DEBT LIMITATION 6%
AMOUNT OF DEBT LIMITATION 14,400,000
OUTSTANDING LONG–TERM INDEBTEDNESS
SUBJECT TO DEBT LIMIT:
CONVENTION CENTER BONDS $ 3,600,000
Chapter 06 – Accounting for General Long-term Liabilities and Debt Service
6-22
Ch. 6, Solutions, Exercise 6-21 (Cont’d)
CITY OF APPLETON
SCHEDULE OF DIRECT AND OVERLAPPING DEBT
DECEMBER 31
Governmental Unit
General
Obligation
Bonds
Estimated
Percentage
Applicable
Estimated
Share of
Overlapping
Debt
Clyde County School District
$ 15,000,000
25%
$ 3,750,000
Clyde County Health Services
8,000,000
25%
2,000,000
Regional Library
2,400,000
33.33%
800,000
Subtotal, Overlapping Debt
6,550,000
City Direct Debt
$ 9,200,000
100%
$ 9,200,000
Total Direct and Overlapping Debt
$ 15,750,000
Note: The city also has $6,600,000 ($2,700,000 + $1,900,000 + $2,000,000) of self–
General Problem Information: Legal debt margin, direct and overlapping debt
Learning Objective: 6-2
Topic: General Long-Term Liabilities
Bloom’s Taxonomy: Apply
Accreditation Skills tag: AACSB: Knowledge Application, AICPA: FN Reporting
Level of Difficulty: Medium
Chapter 06 – Accounting for General Long-term Liabilities and Debt Service
6-23
Ch. 6, Solutions (Cont’d)
6-22. GRANT COUNTY
Debits Credits
a. Debt Service Fund:
ESTIMATED OTHER FINANCING SOURCES 7,125,000
ESTIMATED REVENUES 1,607,500
b. $207,500
c. No. The only interest and principal expenditures recorded relate to
Chapter 06 – Accounting for General Long-term Liabilities and Debt Service
6-24
Ch. 6, Solutions, Exercise 6-22 (Cont’d)
e.
GRANT COUNTY
DEBT SERVICE FUND
STATEMENT OF REVENUES, EXPENDITURES AND
CHANGES IN FUND BALANCES
FOR THE YEAR ENDED JUNE 30
REVENUES:
SALES TAXES $1,582,000
INVESTMENT EARNINGS 11,500
TOTAL REVENUES 1,593,500
EXPENDITURES:
General Problem Information: Debt Service Fund Trial balance
Learning Objective: 6-5
Topic: Various sections from chapter
Bloom’s Taxonomy: Apply
Accreditation Skills tag: AACSB: Knowledge Application, AICPA: FN Reporting
Level of Difficulty: Medium
Chapter 06 – Accounting for General Long-term Liabilities and Debt Service
6-25
Ch. 6, Solutions (Cont’d)
6-23. a. SANDY BEACH
Debits Credits
1. Serial Bond Debt Service Fund:
ESTIMATED OTHER FINANCING SOURCES 416,250
ESTIMATED REVENUE 1,020,000
2. Serial Bond Debt Service Fund:
CASH 213,750
OTHER FINANCING SOURCES—INTERFUND
TRANSFERS IN 213,750
EXPENDITURES—BOND INTEREST 213,750
Chapter 06 – Accounting for General Long-term Liabilities and Debt Service
6-26
Ch. 6, Solutions, Exercise 6-23 (Cont’d)
Debits Credits
3. Serial Bond Debt Service Fund:
TAXES RECEIVABLE—CURRENT 1,020,000
4. Serial Bond Debt Service Fund & Governmental Activities:
5. Serial Bond Debt Service Fund:
CASH 202,500
OTHER FINANCING SOURCES—INTERFUND
Chapter 06 – Accounting for General Long-term Liabilities and Debt Service
6-27
Ch. 6, Solutions, Exercise 6-23 (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
ESTIMATED REVENUE 1,020,000
Chapter 06 – Accounting for General Long-term Liabilities and Debt Service
6-28
Ch. 6, Solutions, Exercise 6-23 (Cont’d)
b.
SANDY BEACH
DEBT SERVICE FUND
STATEMENT OF REVENUES, EXPENDITURES AND
CHANGES IN FUND BALANCE
FOR THE YEAR ENDED DECEMBER 31, 2020
REVENUES:
PROPERTY TAXES $1,019,000
EXPENDITURES:
BOND INTEREST $ 416,250
BOND PRINCIPAL 1,000,000
c. SANDY BEACH
DEBT SERVICE FUND
BALANCE SHEET
DECEMBER 31, 2020
ASSETS:
CASH $ 528,000
TAXES RECEIVABLE—DELINQUENT 1,000
Chapter 06 – Accounting for General Long-term Liabilities and Debt Service
6-29
Ch. 6, Solutions, Exercise 6-23 (Cont’d)
General Problem Information: Serial bond debt service fund transactions and
statements
Learning Objective: 6-2, 6-5
Topic: Types of Serial Bonds
Bloom’s Taxonomy: Apply
Accreditation Skills tag: AACSB: Knowledge Application, AICPA: FN Reporting
Level of Difficulty: Hard
6-24. TOWN OF BEAR CREEK DEBT SERVICE FUND
Debits Credits
a. ESTIMATED OTHER FINANCING SOURCES 468,922
ESTIMATED REVENUES 5,234
b. CASH 234,461
OTHER FINANCING SOURCES—INTERFUND
TRANSFERS IN 234,461
d. CASH 234,461
OTHER FINANCING SOURCES—INTERFUND
TRANSFERS IN 234,461
INVESTMENTS 174,461
Chapter 06 – Accounting for General Long-term Liabilities and Debt Service
6-30
Ch. 6, Solutions, Exercise 6-24 (Cont’d) Debits Credits
f. APPROPRIATIONS 60,000
BUDGETARY FUND BALANCE 414,156
General Problem Information: Term bond debt service fund transactions
Learning Objective: 6-5
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
6-31
Ch. 6, Solutions (Cont’d)
6-25. JOURNAL ENTRIES
DEBT SERVICE 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
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
61,250
Cash
62,500
Note: *OFS = Other Financing Sources. ** CWIP = Construction Work in Progress. + OS = Outstanding
Chapter 06 – Accounting for General Long-term Liabilities and Debt Service
6-32
Ch. 6, Solutions, Exercise 6-25 (Cont’d)
DEBT SERVICE 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
Chapter 06 – Accounting for General Long-term Liabilities and Debt Service
6-33
Ch. 6, Solutions, Exercise 6-25 (Cont’d)
DEBT SERVICE 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
Chapter 06 – Accounting for General Long-term Liabilities and Debt Service
6-34
Ch. 6, Solutions, Exercise 6-25 (Cont’d)
DEBT SERVICE 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, 6-5
Topic: Debt Service Funds
Bloom’s Taxonomy: Apply
Accreditation Skills tag: AACSB: Knowledge Application; AICPA: Critical Thinking, FN Reporting
Level of Difficulty: Hard