Answer:
Issuance of bonds:
Debit: Cash (bond proceeds) $1.3 million
Credit: Bonds Payable $1.2 million
Credit: Premium on Bonds Payable $100,000
Contribution from general fund:
Debit: Cash (general fund contribution) $800,000
Credit: Contributed Capital (general fund contribution) $800,000
Construction of library:
Debit: Construction in Progress $2 million
Credit: Cash (bond proceeds) $1.3 million
Credit: Contributed Capital (general fund contribution) $800,000
In these transactions, the following funds are required:
- Cash (bond proceeds): This represents the cash received from the sale of the bonds.
- Bonds Payable: This represents the debt that the city has taken on through the issuance of the bonds.
- Premium on Bonds Payable: This represents the excess amount that the city received from the sale of the bonds above the face value of the bonds.
- Cash (general fund contribution): This represents the cash that the city is contributing from its general fund towards the construction of the library.
- Contributed Capital (general fund contribution): This represents the capital that the city is contributing from its general fund towards the construction of the library.
- Construction in Progress: This represents the cost of the construction of the library.