Assume that at the maturity of a bond issue for which a debt service fund had been used, the amount of cash on hand is $100,000 and the reserve for debt retirement is $100,000. An entry is made to record matured bonds that have been carried in the general long-term debt group of accounts

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Step 1: The entries to record debt retirement in the debt service fund are as follows:
Reserve for debt retirement                                        $100,000
Appropriation, debt service, principal of debt                                 $100,000
To record the appropriation of the board of education to retire the principal of matured bonds
Expenditures, debt service, principal of debt     $100,000
Matured bonds payable    $100,000
To record the expenditure for retirement of principal of debt

Step 2: The entry to record the transfer of cash to a fiscal agent for payment of the maturity value of the matured bonds is as follows:

Cash with fiscal agent for debt retirement $100,000
Cash $100,000
To record transfer of cash to fiscal agent for payment of maturity value of long-term bonds

Step 3: When the report of the fiscal agent is received along with each canceled, paid or redeemed bond, the following entry is made:
Matured bonds payable $100,000
Cash with fiscal agent for debt retirement $100,000
To record payment of matured bonds payable by the fiscal agent and receipt of canceled bonds

Question 14.9: Assume that at the maturity of a bond issue for which a debt...

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