Question

When bonds are sold at a premium for a capital project, the premium amount generally?

1) Increases the cash available to the capital projects fund.
2) Is transferred to the debt service fund.
3) Is transferred to the General Fund.
4) Is ignored by both the capital projects fund and any other fund.

Answer 1

When bonds are sold at a premium for a capital project, the premium amount generally increases the cash available to the capital projects fund.

Step-by-step explanation:

When bonds are sold at a premium for a capital project, the premium amount generally increases the cash available to the capital projects fund. In other words, the additional money received from selling the bonds at a premium is added to the capital projects fund and can be used for the designated capital project. This is beneficial as it provides more financial resources for the project.