In a special election held on May 1, 2016, the voters of the City of Cerone approved a $10,000,000 issue of 6 percent general obligation bonds maturing in 20 years. The proceeds of this sale will be used to help finance the construction of a new civic center. The total cost of the project was estimated at $15,000,000.
The remaining $5,000,000 will be financed by a state grant, which has been awarded. A capital projects fund was established to account for this project and was designated the civic center construction fund.
The formal project authorization was appropriately recorded in a memorandum entry.
The following transactions occurred during the fiscal year beginning July 1, 2016, and ending
June 30, 2017.
1. On July 1 the general fund loaned $500,000 to the civic center construction fund for defraying engineering and other expenses.
2. Preliminary engineering and planning costs of $320,000 were paid to Eminem Engineering Company. There had been no encumbrance for this cost.
3. On December 1 the bonds were sold at 101. The premium on the bonds was transferred to the debt service fund.
4. On March 15 a contract for $12,000,000 was entered into with Candu Construction Company for the major part of the project.
5. Orders were placed for materials estimated to cost $55,000.
6. On April 1 a partial payment of $2,500,000 was received from the state.
7. The materials that were previously ordered were received at a cost of $51,000 and paid.
8. On June 15 a progress billing of $2,000,000 was received from Candu Construction for work done on the project. As per the terms of the contract, the city will withhold 6 percent of any billing until the project is completed.
9. The general fund was repaid the $500,000 previously loaned.
REQUIRED
1. Prepare journal entries to record the transactions in the civic center construction fund for the period July 1, 2016, through June 30, 2017, and the appropriate closing entries at June 30, 2017.
2. Prepare a balance sheet for the civic center construction fund on June 30, 2017.