Existing Debt Service Fund Transactions
The City Hall Debt Service Fund of the City of Monroe has been open for five years; it was created to service an $16,000,000, 3 percent tax-supported bond issue. As of December 31, 2014, this serial bond issue had a balance of $12,000,000. Semiannual interest payments are made on January 1 and July 1, and a principal payment of $400,000 is due on January 1 and July 1 of each year.
As this is a regular serial bond debt service fund, the only accounts with balances as of January 1, 2015, were Cash with Fiscal Agent and Fund Balance-Assigned for Debt Service, each with balances of $580,000. (Revenues were raised and collected in cash in 2014 in order to be able to pay bond principal and interest due on January 1, 2015.) The government chose not to accrue interest payable.
Required:
a. Open a general journal for the City Hall Debt Service Fund and prepare journal entries for the following transactions. Control accounts are not necessary
(1) The fiscal agent reported that $180,000 in checks had been mailed to bondholders for interest due on January 1, and $400,000 in checks were mailed for bonds maturing that day.
(2) Cash in the amount of $574,000 was received from the General Fund on June 30 and was transferred to the fiscal agent.
(3) The fiscal agent reported that checks dated July 1 had been mailed to bondholders for interest of $ 174,000 due that day and $400,000 in checks were mailed for bonds maturing that day.
(4) Cash in the amount of $568,000 was received from the General Fund on December 31 and transferred to the fiscal agent to be used for the interest and principal due on January 1 (next fiscal year). The government elected to not accrue the interest or principal at year-end.
b. Post the entries to the City Hall Debt Service Fund ledger (t-accounts).
c. Prepare and post an entry closing all nominal accounts to Fund Balance.
5-C. Part 3. New Debt Service Fund Transactions
On the advice of the city attorney, a City Jail Debt Service Fund is opened to account for debt service transactions related to the bond issue sold on January 1, 2015 (see Part 1).
Required:
a. Open a general journal for the City Jail Debt Service Fund. Record the following transactions, as necessary. Control accounts are not necessary
(1) The premium described in transaction 1 of Part 1 was received as a transfer from the capital projects fund.
(2) Cash in the amount of $160,000 was received from the General Fund on June 30 and was transferred to the fiscal agent.
(3) The fiscal agent reported that checks dated July 1 had been mailed to bondholders for interest due that day.
(4) The transfer described in part c of Part 1 was received.
(5) Cash in the amount of $360,000 was received from the General Fund on December 31 and transferred to the fiscal agent to be used for interest and principal payments due on January 1 (next fiscal year). The government elected to not accrue the interest at year-end.
(6) $ 200,000 of the remaining cash on hand was invested.
b. Post the entries to the City Jail Debt Service Fund ledger (t-accounts).
c. Prepare and post an entry closing all nominal accounts to Fund Balance. Assume any remaining net resources are classified as Fund Balance - Assigned for Debt Service.
5-C. Part 4. Governmental Funds Financial Statements
Required:
a. Prepare a Balance Sheet for the governmental funds for the City of Monroe as of December 31, 2015. Include the General Fund, the Street and Highway Fund (P4-C), the City Hall Debt Service Fund, and the City Jail Debt Service Fund. Use the balances computed in 4-C for the General Fund and special revenue fund portions of this statement.
b. Prepare a Statement of Revenues, Expenditures, and Changes in Fund Balances for the governmental funds for the City of Monroe for the Year Ended December 31, 2015. Include the same funds as listed in requirement a plus the City Jail Construction Fund.