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, 2012, the City of Johnstown issued 6% general obligation serial bonds in the amount of $3,000,000 at 101 ($3,030,000) and used $2,970,000 of the proceeds to construct a fire station. The $30,000 premium was transferred to a debt service fund. The $30,000 left in the capital projects fund at the end of the project was transferred to the debt service fund. The bonds were dated April 1, 2012 and paid interest on October 1 and April 1. The first of 10 equal annual principal payments was due on April 1, 2013.
-How would the $30,000 premium be accounted for?

A) As an other financing source in the debt service fund.
B) Amortized to interest expenditure in the debt service fund.
C) Both (a) and (b) above.
D) None of the above.