Final answer:
The total principal to be accounted for through debt service funds for the bonds issued by Valencia Village is $1,400,000. This includes $600,000 for street lights and $800,000 for a public golf course, which will be paid off over the life of the bonds.
Step-by-step explanation:
How much should be accounted for through debt service funds for payments of principal over the life of the bonds issued by Valencia Village? This question revolves around bond financing and the repayment of principal through debt service funds.
For the $600,000 in bonds for street lights, the principal amount of $600,000 will be paid over the life of the bonds, plus any accrued interest. Similarly, the $800,000 in bonds for the construction of a public golf course will have its principal amount of $800,000 paid off over the term of the bonds, in addition to interest. Since debt service funds are typically used to pay off both principal and interest on long-term debt, the total principal to be accounted for through debt service funds would be the sum of the principal amounts of both bond issues, totaling $1,400,000.
Regarding the example given for a two-year bond issued at $3,000 with an 8% interest rate, the bond would pay $240 in interest each year, and the principal repayment of $3,000 would occur at the end of the second year. If the discount rate stays at 8%, the present value of these future payments would equal the face value of the bond. However, if the discount rate increases to 11%, the present value would be lower, as future payments would be discounted more heavily.