Prepare appropriate journal entry in debt service fund

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Reference no: EM13131403

On July 1, a city issued, at par, $100 million in 6 per-cent, 20-year general obligation bonds. It established a debt service fund to account for resources set aside to pay interest and principal on the obligations.

In the year that it issued the debt, the city engaged in the following transactions involving the debt service fund:

1. It estimated that it would make interest payments of $3 million and have interest earnings of $30,000 from investments. It would transfer from the general fund to the debt service fund $2.97 million to pay interest and $500,000 to provide for the payment of principal when the bonds mature. Further, as required by the bond proceeds from the capital projects fund to the debt service fund to be held in reserve until the debt matures. Prepare appropriate journal entry in debt service fund, including budgetary and closing entries.

Reference no: EM13131403

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