Preston Village engaged in the following transactions:
1. It issued $ 20 million in bonds to purchase a new municipal office building. The proceeds were recorded in a capital projects fund.
2. It acquired the building for $20 million.
3. It recognized, as appropriate, $300,000 of depreciation on municipal vehicles.
4. It transferred $2,060,000 from the general fund to a debt service fund.
5. It paid $60,000 in interest on long-term debt and repaid $2 million of principal on the same long-term debt.
6. It sold for $ 5 million village land that had been acquired for $4 million. The proceeds were recorded in the general fund.
a. For each of the transactions, prepare journal entries to record them in appropriate governmental funds (which are accounted for on a modified accrual basis).
b. Prepare journal entries to reflect how the transactions would be reflected in government-wide statements (which are prepared on a full accrual basis).
c. How can governments justify preparing two sets of financial statements, each on a different basis?