Question

Debt service funds may be sued to account for all of the following except:

A) Repayment of debt principal

B) Lease payments under capital leases

C) Amortization of premiums on bonds payable

D) The proceeds of refunding bond issues

Answer 1

Answer: C) Amortization of premiums on bonds payable

Explanation:

A debt service fund is a cash reserve that is used to pay for interest and principal payments on some types of debt. Debt service funds may be sued to account for repayment of debts, the proceeds of refunding bond issues and also lease payment under capital leases but may not account for amortization of premiums on bond payable.