Accounting Homework Help

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The City of Yuma, Arizona accounts for debt service related to its $10,000,000 face value, 5% general obligation term bonds, issued July 1, 2019, in a debt service fund. The city’s accounting year ends on June 30. Interest on the bonds is due each December 31 and June 30. 

The following events occur in fiscal 2020:

1. The debt service fund budget called for $1,250,000 in transfers from the general fund, $20,000 in income on investments, and appropriations for the two semiannual interest payments.

2. The general fund transferred $1,250,000 to the debt service fund on August 15. The debt service fund invested the cash.

3. The debt service fund liquidated investments carried at $300,000 for $315,000 and made the December 31 interest payment.

4. The debt service fund liquidated investments carried at $270,000 for $260,000 and made the June 30 interest payment.

5. Dividend and interest income for the year, received in cash, was $45,000.

6. At June 30, 2020, the debt service fund’s investments had a fair value of $660,000.

Assume that all debt service fund resources are committed.

Required

a. Prepare the journal entries to record the above events in the debt service fund. Include necessary closing entries.