a. Armstrong County established a County Office Building Construction Fund to account for a project that was expected to take less than one year to complete. The County’s fiscal year ends on June 30.
(1) On July 1, 2011, bonds were sold at par in the amount of $8,750,000 for the project.
(2) On July 5, a contract was signed with the Sellers Construction Company in the amount of $8,650,000.
(3) On December 30, a progress bill was received from Sellers in the amount of $6,000,000. The bill was paid, except for a 5 percent retainage.
(4) On June 1, 2012, a final bill was received in the amount of $2,650,000 from Sellers, which was paid, except for the 5 percent retainage. An appointment was made between the County Engineer and Bill Sellers to inspect the building and to develop a list of items that needed to be corrected.
(5) On the day of the meeting, the County Engineer discovered that Sellers had filed for bankruptcy and moved to Florida. The City incurred a liability in the amount of $490,000 to have the defects corrected by the Baker Construction Company. (Charge the excess over the balance of Contracts Payable—Retained Percentage to Construction Expenditures.)
(6) All accounts (from 5 above) were paid; remaining cash was transferred to the Debt Service Fund.
(7) The accounts of the County Office Building Construction Fund were closed. Record the transaction in the County Office Building Construction Fund.
b. Prepare a separate Statement of Revenues, Expenditures, and Changes in Fund Balances for the County Office Building Construction Fund for the year ended June 30, 2012.