Accounting for Debt Service

Fund
 DEBT SERVICE ACCOUNTING FOR SERIAL BONDS:
REGULAR
Early in 2021, the City Council of the City of Addis authorized an issue of
ETB1,200,000 of 8 percent tax-supported bonds for the Fire Station
expansion project. The interest payment dates are June 30 and December
31, and that the first of the 10 equal annual principal payments will be on
December 31, 2021.
1. The bonds were sold on January 2, 2021, at a premium of ETB12,000, which was
recorded in the capital projects fund and latter transferred to the debt service
fund .
2. Assuming the ETB12,000 amount was known at the time of budgetary planning,
determine the amount needed for 2021. The budgeted amount is transferred from
the General Fund to the Debt Service Fund.
3. On June 30, ETB48,000 was paid to Development Bank of Ethiopia to make the
first interest payment. The DSF recorded the expenditure and the liability.
4. The fiscal agent reports that checks have been issued to all bondholders.
5. On December 31, the next interest payment is due; also on that date, a principal
payment is due. The debt service fund pays the balance for payment and records
the expenditures and liabilities for principal and interest.
6. The bank reported that all payments had been made as of December 31, 2012
7. The capital projects funds transfer ETB 36,500 to the debt service fund was
recorded.
 DEBT SERVICE ACCOUNTING FOR SERIAL BONDS: REGULAR

1. Cash 12,000
Equity Transfers In 12,000
2.1. Semi-annual Interest June 30 [1,200,000 x .08 x 6/12] 48,000
Semi-annual Interest December 31[1,200,000x.08x6/12] 48,000
Principal, December 31, [1,200,000/10] 120,000
Total Cash Needed
216,000
Less: Equity Transfers In (12,000)
Cash needs (net) for 2012 204,000
2.2. Cash 204,000
Other Financing Sources-Transfers In 204,000
3.1 Cash with Fiscal Agent 48,000
Cash 48,000
3.2 Expenditures- Bonds Interest 48,000
Matured Interest Payable 48,000
4. Matured Interest Payable 48,000
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Cash with Fiscal Agent 48,000
 DEBT SERVICE ACCOUNTING FOR SERIAL BONDS: REGULAR

5.1 Cash with Fiscal Agent 168,000

Cash 168,000
5.2 Expenditures-Bond Principal 120,000

Expenditures- Bond Interest 48,000

Matured Bonds Payable 120,000
Matured Interest Payable 48,000
6. Matured Bonds Payable 120,000
Matured Interest Payable 48,000
Cash with Fiscal Agent 168,000
7. Cash 36,500
Equity Transfers In 36,500
8. Equity Transfers In [12,000+36,500] 48,500
Other Financing Sources 204,000
Expenditures-Bond Principal 120,000
Expenditures-Bond Interest 96,000
Fund Balance 36,500
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