For the second year in the debt service fund, entries for several situations are in the following steps.

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Accepted Answer

Step 1: Record the budget entry from the accumulation schedule for the debt service fund for the second year as follows:
Required taxation    $16,379
Required earnings                                                                        1,638
Reserve for debt retirement                                                                 $18,017
To record the budget for the debt service fund for the second year

Step 2: When the general fund makes the tax assessment and levy, the following entry is made in the debt service fund:
Due from the general fund $16,379
Revenue from taxation $16,379
To record the claim against the general fund at the time of the tax assessment and levy by the general fund

Step 3: Assuming that the exact amount of taxes was collected by the general fund and was transferred to the debt service fund, the following entry is made in the debt service fund:
Cash $1,738
Revenue from interest earned $1,738
To record collection of interest earned

Step 4: As soon as cash is received, it should be invested. Therefore, the following entry records investment of total cash:
Investments $18,117
Cash $18,117
To record investment in certificates of deposit

Step 5: At the end of the fiscal year, the following closing entries are made:
Revenue from taxation $16,379
Revenue from interest earned 1,738

Revenue and expenditure summary $18,117
To close revenue accounts
Revenue and expenditure summary                                 $18,017
Required taxation                                                                                    $16,379
Required earnings 1,638
To close budgetary revenue accounts
Revenue and expenditure summary                                    $100
Debt service fund balance $100
To close the revenue and expenditure summary

Step 6: The debt service fund balance sheet at the end of the second year would contain the following accounts:
Assets:
Investments                                                                                             $34,496
Fund Balance:
Unappropriated                                                                                            $100
Reserve for debt retirement                                                                    34,396
$34,496

Question 14.5: For the second year in the debt service fund, entries for se...

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