Question

The City of Amarillo is authorized to issue $3,600,000, 5 percent regular serial bonds in 2020 for the construction of a new exit off the interstate highway within city limits. The bonds mature in equal annual amounts beginning on January 1, 2021, for 10 years and pay interest on January 1 and July 1. The city is required to use all accrued interest and premiums to service the debt. The funds to pay the interest will be transferred from the General Fund. The county's fiscal year-end is December 31.

Prepare the budgetary entries for 2020 assuming that the bonds were scheduled to be issued on January 2. Assume that the January 1, 2021, principal and interest payments will be included in the 2021 budget. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field. Do not round intermediate calculations.)

Answer 1

Answer and Explanation:

The Journal entry is shown below:-

Estimated other financing sources - transfers in Dr, $90,000

           To Appropriations $90,000

(($3,600,000 × 5%) ÷ 2)

(Being budget transaction is recorded)

Therefore for recording the budget transaction we simply debited the Estimated other financing sources-transfers in and credited the Appropriations.