Question

Journal entries for a Debt Service Fund The City of Bloomington establishes a Debt Service Fund to accumulate resources to service its 2018 general obligation bonds. Voters approve an additional property tax that can only be used to pay the debt service on the bonds. The city finances the remainder of the debt service through a transfer of general fund resources. Prepare journal entries to record the following transactions for the city’s Debt Service Fund during calendar year 2019. No budgetary entries should be recorded. 1. For 2019, the property tax levy for debt service is $1,000,000 with $4,000 expected to be uncollectible. 2. Property taxes of $950,000 are collected prior to the first interest payment being due on the bonds. 3. Finance director, Yulianti Abbas, invests $750,000 in a short-term investment. 4. The investment matures with interest earnings of $4,000. 5. The city transfers $50,000 from the General Fund to the Debt Service Fund. 6. The city makes its first interest payment on the bonds in the amount of $1 million. 7. The city pays the bill of $4,000 from its fiscal agent for servicing the debt.

Answer 1

Correct Entry for fund transfer will be

Cash A/c Dr $50000

To OSF $50000

Accounts Taxes Receivable Current Allowances for Uncollectible current taxes Revenue - Property Taxes Being tax levied Debit Credit 5 1,000,000 4,000 $ 996,000 Cash Taxes Receivable Current Being tax collected 5 950,000 $950,000 5 750,000 Cash $750,000 Being Investments made Cash 5 754,000 $750,000 4,000 Revenue Investment Income Being Investment matured with Interest OFS Transfer to SA DSF Cash 50,000 $50,000 Expenditures Debt Service Interest Cash Being Interest paid 5 1,000,000 1,000,000