Question

The City of Twizzle issues $10,000,000 face value of general obligation bonds for $9,800,000. The bonds will be used for the construction of new city streets. What journal entry should the City make in its Capital Projects Fund to record the issuance of these bonds?

Answer 1

The City of Twizzle will debit its Cash/Bank account with $9,800,000 as well as Debit entry of $200,000 for discount on bond account. The credit enry of $10,000,000 will recorded in the bond account.

Date Description DR CR

Cash/Bank 9,800,000

Discount on Bonds 200,000

Bond Payable 10,000,000

Step-by-step explanation:

Answer 2

Dr Cash $9,800,000

Dr Other financing use—bond issue discount $200,000

Cr Other financing source—long-term debt issued $10,000,000

Step-by-step explanation:

Journal entries

Dr Cash $9,800,000

Dr Other financing use—bond issue discount $200,000

Cr Other financing source—long-term debt issued $10,000,000

$10,000,000 -$9,800,000

=$200,000

Therefore since $10,000,000 face value of general obligation bonds for $9,800,000 we are to debit Cash $9,800,000 as well as Other financing use—bond issue discount $200,000 which is the difference between $10,000,000 -$9,800,000 while we credit

Other financing source—long-term debt issued at $10,000,000