Chapter 6 Transactions Affecting General Long-Term Liabilities and Debt Service

The City of Bingham utilizes a single debt service fund to account for the service of all issues of tax-supported and special assessment long-term debt. As of December 31, 2022, one issue of tax-supported serial bonds was outstanding. The post-closing trial balance of the debt service fund as of December 31, 2022, is shown below. The 3%, $5,000,000 tax-supported serial bonds were issued on June 30, 2021 at 2.75%. $4,250,000 remains outstanding on December 31, 2022. Bonds of this issue mature in the amount of $250,000 on June 30 and December 30 of each year. Interest is also paid on these dates. The cash balance of the debt service fund on December 31, 2022, is restricted for the repayment of tax-supported bond principal and interest payments. a. Record the following accounts and balances in the debt service fund general journal, selecting 2022 from the [Year] menu and using 6a for the [Add description]. When completed select [Post entries] to post the entries in the general ledgers. (Note: These opening balances were previously recorded in the governmental activities general journal in Chapter 2 of this project.) CITY OF BINGHAM Debt Service Fund Trial Balance As of December 31, 2022 Debits Credits Cash $ 950,000 Taxes ReceivableDelinquent 87,625 Allowance for Uncollectible Delinquent Taxes $ 7,450 Interest and Penalties Receivable on Taxes 5,915 Allowance for Uncollectible Interest and Penalties 532 Deferred Inflows of Resources 85,558 Fund BalanceRestricted 950,000 Totals $1,043,540 $1,043,540 Additional Information: On April 1, 2023, the City of Bingham sold a 10-year issue of tax-supported serial bonds to finance the construction and equipping of an annex to City Hall. As described in Chapter 5 of this cumulative problem, the total amount of bonds issued on that date was $7,500,000, sold at $7,550,225 (an effective interest rate of 1.875%). The issue bears interest at the annual rate of 2 percent, payable on April 1 and October 1 of each year; bonds in the amount of $375,000 will mature on April 1, 2024, and every six months thereafter until maturity. The premium on these bonds will be amortized using the effective interest method. Cash for the payment of interest in 2023 will be provided by the General Fund (see Chapter 4). Required: b. Prepare general journal entries, as necessary to record the following transactions in the debt service fund general journal and, if applicable, in the governmental activities general journal. Use account titles listed under the drop down [Account] menu. Be sure the year 2023 is selected from the drop-down [Year] menu and the appropriate paragraph number shown in bold-face font below is in the [Add description] box. 1.

[Para. 6b-11] On December 30, the debt service fund made the principal and interest payments associated with the 3% serial bond. Required: Record this transaction in both the debt service fund and governmental activities journals. In the governmental activities journal, reduce the premium on bonds payable by $4,461. 12.

[Para. 6b-12] The uncollected balance of current taxes receivable and the related estimated uncollectible account were reclassified as delinquent. Property tax revenues and deferred inflows of resources were adjusted for unavailable revenues. Interest and penalties of $1,200 were accrued, of which $120 was estimated to be uncollectible. Required: Record this transaction in both the debt service fund and governmental activities journals. In the debt service fund the dollar amount of net receivables and net interest and penalties also results in a debit to revenues and a credit to deferred inflows of resources. 13.

[Para. 6b-13] At December 31, 2023, accrued interest expense on the 2% bond issue was recorded in the governmental activities general journal. Amortization of the premium on the 2% bonds sold was also recorded in the amount of $2,128. Required: Record the accrual in the governmental activities journal.