After discussions with property owners in San Antonio's King William Historic District, City Council authorized installation of a large number of particularly elegant and tasteful street lights in the district. Total cost of the project is $3,300,000. Council will contribute $300,000 and ten-year term bonds will be issued to fund construction of the project. San Antonio can issue bonds paying 6 percent annually at par. The principal and interest will be repaid in ten equal annual assessments paid by the property owners in the historic district. Because each annual assessment exceeds the interest due on the bonds, the excess is invested at 6 percent to retire the principal.
Required
a. Calculate the amount of the total annual assessment needed to pay the annual interest for ten years and retire the bonds.
b. Assume the government is liable for the bonds. Prepare the fund journal entries and identify the funds affected when the bonds are issued, the assessments are levied, the first assessment is collected, and the first interest payment is made.
c. Repeat b. assuming the government has no liability for the bonds.