Pacic Independent School District issued$100 million of general obligation bonds

Question

Pacic Independent School District issued$100 million of general obligation bonds to nancethe construction of new schools. The bonds wereissued at a premium of $600,000.

1. Prepare the capital projects fund journalentries to record the issue of the bonds andthe transfer of the premium to an appropriatefund.

2. Suppose, instead, that the bonds are issued at adiscount of $600,000 but that the project stillcosts $100 million. Prepare the appropriateentries.

a. Contrast the entries in this part and in
part 1.

b. Indicate the options available to the schooldistrict and tell how they affect the entriesrequired of the district.

c. Suppose the government chose to nancethe balance of the project with generalrevenues. Prepare the appropriate capitalprojects fund entry.

Explanation / Answer

Bonds issued at a premium
Cash $100.6
Other financing sources—bond proceeds (face value) $100.0
Other financing sources—bond proceeds (bond premium) 0.6
To record the issue of bonds at a premium
Other financing use—nonreciprocal transfer of bond premium to debt service fund $ 0.6
Cash $ 0.6
To record the transfer of the bond premium to the debt service fund
2. Bonds issued at a discount
Cash $99.4
Other financing sources—bond proceeds (bond discount) $ 0.6
     Other financing sources—bond proceeds (face value) $100.0
To record the issue of bonds at a discount

a. The bond discount is transferred neither to nor from the debt service fund. The bonds were sold for less than anticipated. The proceeds will be insufficient to pay for the new schools.

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