The City of Dandridge has $8,000 par value of general government, general obligation bonds payable outstanding. The bonds have a call option at 102. The city has decided to call the bonds at their call date. The city uses a Debt Service Fund for all refunding transactions. All amounts are in thousands of dollars.

\underline{\text{ Transactions:}}

SITUATION A
1. The city issued $8,160 refunding bonds at par.
2. The city paid $8,160 to bondholders to retire the bonds at the call date.
SITUATION B
1. The city issued $4,000 of refunding bonds at par.
2. The city transferred $4,160 from the General Fund to the Debt Service Fund to provide the additional resources needed to call the bonds.
3. The city paid $8,160 to bondholders to retire the bonds at the call date.

\underline{\text{ Requirements: }}

1. Prepare the journal entries required in a Debt Service Fund to record these transactions, assuming the bond anticipation notes do not qualify for long-term debt treatment. If no entry is required, state "No entry required" and explain why.
2. Indicate the effects of each transaction on the accounting equation of the Debt Service Fund and on the General Capital Assets and General Long-Term Liabilities accounts. If an element is not affected, put "NE" in the appropriate box.

A Government Has $3,000,000 of 6%, 10-Year General Obligation Bonds

Multiple Choice

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