Use the Following to Answer the Next Six Questions

Multiple Choice

Use the following to answer the next six questions:
During the fiscal year ended December 31, 2015, the City of Johnstown issued 6% general obligation serial bonds in the amount of $2,000,000 at 102 ($2,040,000) and used $1,980,000 of the proceeds to construct a fire station. The $40,000 premium was transferred to a debt service fund. The $20,000 left in the capital projects fund at the end of the project was later transferred to the debt service fund. The bonds were dated April 1, 2015 and paid interest on October 1 and April 1. The first of 10 equal annual principal payments was due on April 1, 2016.
-How would the government account for the transfer of the unused bond proceeds?

A) As a revenue in the debt service fund and as an expenditure in the capital projects fund.
B) As an other financing source in the capital projects fund and as an other financing use in the debt service fund.
C) As an other financing source in the debt service fund and as an other financing use in the capital projects fund.
D) As a special item in both the debt service and capital project funds.