Government and NFPO accounting

Your city has decided to build a new library. The projected cost is $2 million. A bond issue for $1.2 million

has been authorized, and the remainder is supposed to come from a contribution of $800,000 from the

general fund. The bonds sold for $1.3 million, a premium of $100,000. Create the required journal entries

for the following transactions:

The budget for the library
The payment and receipt of funds from the general fund
The issuance of the bonds
Assume that the premium remained in the capital projects fund.
Identify all of the funds required for these entries.
Discuss how the bond premium could be disposed.
In general terms, compare and contrast how expenditures are controlled in the general fund and in debt

service funds. Explain why differences would occur.

Sample Solution

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