Question

Adair Valley issued $20,000,000 of general obligation bonds to construct a multipurpose arena. These bonds will be serviced by a tax on the revenue from events held in the arena and will mature in 2024. During 2018, Adair Valley budgeted $2,500,000 of tax revenues and $2,000,000 for interest on the bonds in its Debt Service Fund. Prepare the journal entries necessary to record (a) the budget and (b) the expenditure when the interest comes due for payment.

Answer 1

Answer: Please see explanation column for answer.

Step-by-step explanation:

a) Journal entry to record the budget

Account Debit Credit

Estimated Revenues $2,500,000

Appropriation $2,000,000

Budget fund $500,000

Calculation

Budget fund= Estimated Revenues-Appropriation = $2,500,000- $2,000,000= $500,000

b) Journal entry to record the the expenditure when the interest comes due for payment.

Account Debit Credit

Expenditure Interest $2,000,000

Matured Interest payable $2,000,000