Sugar city issued $2 million of bonds to fund the construction of a new city office building. the bonds have a stated rate of interest of 5% and were sold at 101. which of the following entries should be made in the capital projects fund to record this event?
a) debit cash $2.02 million; credit bonds payable $2 million and premium on bonds payable $.02 million
b) debit cash $2.02 million; credit bonds payable $2 million and other financing sources $.02 million.
c) debit cash $2.02 million; credit other financing sources $2.02 million.
d) debit cash $2.02 million; credit other financing sources $2 million and revenue $.02 million.

C) Debit Cash $2.02 million; Credit Other financing sources $2.02 million

Explanation:

A private firm will reocrd as follow:

As the bonds are sold at a higher price than their face value we recognize a premium which will be amortized over the life of the bond.

But in this case, we are doing a public accounting thus, we must record the cash received and credit other financing sources for the whole amount funded.

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forbearance of student loan payments. under forbearance, your loan payments are postponed (or reduced) but interest continues to accrue during the period of forbearance. if you don't pay the interest during that period, the interest may be “capitalized,” which means it is added to your principal balance.