The City of Amarillo is authorized to issue $8,000,000, 3 percent regular serial bonds in 2023 for the construction of a new exit off the interstate highway within city limits. The bonds mature in equal annual amounts beginning on January 1, 2024, for 10 years and pay interest on January 1 and July 1. The city is required to use all accrued interest and premiums to service the debt. The funds to pay the interest will be transferred from the General Fund. The county's fiscal year-end is December 31. Required a. Prepare the budgetary entries for 2023 assuming that the bonds were scheduled to be issued on January 2. Assume that the January 1, 2024, principal and interest payments will be included in the 2024 budget. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field. Do not round intermediate calculations.) Transaction | Fund | General Journal | Debit | Credit 1. Record the budget transaction. 1 | Debt Service Fund | | |
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3-4. On December 31, 2019, Potter Corporation issued €2,000,000, 6%, 5-year bonds. Interest is paid annually on December 31. The company uses the effective-interest method of amortization. Periods | Present value of $1 (4%) | Present value of $1 (8%) | Present value of ordinary annuity of $1 (4%) | Present value of ordinary annuity of $1 (8%) -|-|-|-|- 4 | 0.85480 | 0.73503 | 3.62990 | 3.31213 5 | 0.82193 | 0.68058 | 4.45182 | 3.99271 Instructions (a) Assume that the market interest rate is 8% at issuance. 1) Compute the issuance price of bonds and prepare the journal entry for the issuance of bonds. 2) Prepare a bond amortization schedule for the first two interest payment dates. (Round to the nearest dollar.) 3) Prepare the journal entries that Potter Corporation would make on December 31, 2019, and December 31, 2020, and December 31, 2021 related to the bond issue. (b) Assume that the market interest rate is 4% at issuance. 1) Compute the issuance price of bonds and prepare the journal entry for the issuance of bonds. 2) Prepare a bond amortization schedule for the first two interest payment dates. (Round to the nearest dollar.) 3) Prepare the journal entries that Potter Corporation would make on December 31, 2019, and December 31, 2020, and December 31, 2021 related to the bond issue. 4) On January 1, 2022, Potter Corporation redeemed the bonds at 101. Prepare the journal entry for the redemption of bonds.
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