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[Para. 5-a-7] On May 6, 2017, 4% deferred serial bonds with a face value of...

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Accounting

[Para. 5-a-7] On May 6, 2017, 4% deferred serial bonds with a face value of $2,000,000 were sold for a total amount of $2,070,000, of which $28,000 was for accrued interest from the January 1, 2017 date of the bonds and $42,000 was a premium on the bonds sold. Cash in the amount of the accrued interest and premium was deposited directly in the Street Improvement Bond Debt Service Fund. Cash in the amount of $2,000,000 was deposited and recorded in the Street Improvement Fund.

Required: Record these transactions in the Street Improvement Fund and governmental activities journals. (Hint: In addition to recording the liability for bonds payable in the governmental activities journal, you should record the premium on the bonds payable [credit Premium on Deferred Serial Bonds] and accrued interest on bonds sold [we recommend that you credit ExpenseInterest on Long-term Debt] in the governmental activities general journal for the $28,000 of accrued interest.) For now you should not make the entries in the Street Improvement Bond Debt Service Fund to record the accrued interest and premium. Those entries will be made in Chapter 6 of this cumulative problem.

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