McGaha VIllage operates a sanitation department as part of its general government activities. McGaha Village will acquire new sanitation trucks that will be financed through the issuance of general obligation bonds. McGaha Village uses a Capital Projects Fund and a Debt Service Fund to account for the transactions. Make journal entries to record the following transactions and events and indicate the appropriate fund in which the transactions are recorded. 1. April1. McGaha Village issues bonds for their face amount of $300,000

2. April1. McGaha Village acquires sanitation trucks at a total cost of $300,000 for cash. The trucks have an estimated useful life of 10 years.

3. October 1. McGaha Village records the fund liability and pays the first installment of principal ($15,000) and interest ($7,500) on the long term debt.

McGaha Village

Journal Entries:

April 1:

Debit Cash Account $300,000

Credit Bonds Payable $300,000

To record the issue of bonds.

April 1:

Debit Sanitation Trucks $300,000

Credit Cash Account $300,000

To record the acquisition of sanitation trucks for cash.

April 1:

Debit Cash Account $300,000

Credit Debt Service Fund $300,000

To record the transfer of funds.

October 1:

Debit Capital Projects Fund $300,000

Credit Debt Service Fund $300,000

To record the funds liability.

Debit Bonds Payable $15,000

Credit Cash Account $15,000

To record the repayment of the bonds.

Debit Interest Expenses $7,500

Credit Cash Account $7,500

To record the payment of interest on the long-term debt.

Explanation:

Journal entries help to initiate the recording of transactions.  They show the accounts to be debited and credited in the General Ledger.  They have some short narrations which explain the transaction.

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