5/7/2020 2. Assignment Print View Award: 1.60 points Residents from the Town of Mountain View authorized a $9,800,000 renovation to their historic town hall on November 15, 2019. Financing for the project consists of $3,600,000 from a 3 percent serial bond issue, $3,200,000 from a state grant, and $3,000,000 from the General Fund. Debt service for the serial bonds will be provided by a one-quarter-cent city sales tax imposed on every dollar of sales in the city. The town has a calendar year-end. Required Prepare journal entries to record the related transactions in the town's capital projects fund, debt service fund, and governmental activities at the government-wide level. (Do not round intermediate calculations. If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field.) Transaction Fund General Journal Debit Credit a. Record the 2020 budget for the Serial Debt Service Fund. Sales taxes of $380,000 are expected to be collected in 2020; the only appropriation is expected to be six months of interest on the serial bond. a Debt Service fund Estimated Revenues 380,000 Appropriations 54,000 Budgetary Fund Balance Capital Projects Fund 326,000 No Journal Entry Required Governmental Activities No Journal Entry Required b. The town transfers $3,000,000 from the General Fund to a newly established capital projects fund. b Debt Service fund No Journal Entry Required Capital Projects Fund Cash 3,000,000 Other Financing SourcesInterfund Transfers In 3,000,000 Governmental Activities No Journal Entry Required c. Planning and architect's fees for the town hall renovation are paid in the amount of $230,000. c Debt Service fund No Journal Entry Required Capital Projects Fund Construction Expenditures 230,000 Cash 230,000 Governmental Activities Construction Work in Progress 230,000 Cash 230,000 d. The town hall renovation construction contract is awarded to a local contractor, Central Paving and Construction, for $8,712,000. d Debt Service fund No Journal Entry Required Capital Projects Fund Encumbrances 8,712,000 Encumbrances Outstanding 8,712,000 Governmental Activities No Journal Entry Required e. On April 1, 2020, the town issues serial bonds with a face value totaling $3,600,000 and having maturities ranging from one to 20 years at 102. The bonds bear interest of 3 percent per annum, payable semiannually on April 1 and October 1. e(1) Debt Service fund Record the issue of bonds in the Debt Service Fund Cash E ti 72,000 t d Oth Fi i S P i B d 72 000 https://ezto.mheducation.com/hm.tpx?todo=c15SinglePrintView&singleQuestionNo=2.&postSubmissionView=13252712110183095&wid=1325271338... 1/5 5/7/2020 Assignment Print View Estimated Other Financing SourcesPremium on Bonds 72,000 Premiums on bonds issued must be deposited directly in the debt service fund and are restricted for debt service. (Remember to amend the debt service fund budget because this premium was not anticipated.) e(2) Estimated Other Financing SourcesPremium on Bonds 72,000 Budgetary Fund Balance e(3) Capital Projects Fund 72,000 Premiums are amortized using the straight-line method over 40 interest periods. Record the issue of bonds. Cash 3,600,000 Other Financing SourcesProceeds of Bonds e(4) 3,600,000 Governmental Activities Record the issue of bonds. Cash 3,672,000 Premium on Bonds Payable 72,000 Bonds Payable 3,600,000 f. The capital projects fund paid the city's Utility Fund $30,000 for wiring associated with the renovation. No encumbrance had been recorded for this service. f Debt Service fund No Journal Entry Required Capital Projects Fund Construction Expenditures 30,000 Cash Governmental Activities Construction Work in Progress 30,000 30,000 Cash 30,000 g. On October 1, 2020, the city mailed checks to bondholders for semiannual interest on the bonds. g Debt Service fund ExpendituresInterest 54,000 Cash Capital Projects Fund 54,000 No Journal Entry Required Governmental Activities Premium on Bonds Payable ExpensesInterest on Long-term debt 1,800 52,200 Cash 54,000 h. Sales taxes earmarked for debt service of $380,000 were collected. h Debt Service fund Cash 380,000 Revenues Capital Projects Fund 380,000 No Journal Entry Required Governmental Activities Cash 380,000 General RevenuesTaxes 380,000 i. Central Paving and Construction submitted a progress billing to the town for $3,600,000. The city's public works inspector agrees that all milestones have been met for this portion of the work. i Debt Service fund No Journal Entry Required Record the reversal of encumbrances for the progress to date on the project and also the construction expenditure for the invoice received. Capital Projects Fund Encumbrances Outstanding 3,600,000 Construction Expenditures 3,600,000 Encumbrances 3,600,000 Contracts Payable 3,600,000 Governmental Activities Construction Work in Progress Contracts Payable 3,600,000 3,600,000 j. The town paid Central Paving and Construction the amount it had billed, except for 3 percent that was withheld as a retained percentage per terms of the contract. j Debt Service fund No Journal Entry Required https://ezto.mheducation.com/hm.tpx?todo=c15SinglePrintView&singleQuestionNo=2.&postSubmissionView=13252712110183095&wid=1325271338... 2/5 5/7/2020 j y Capital Projects Fund q Assignment Print View Contracts Payable 3,600,000 Contracts PayableRetained Percentage 108,000 Cash Governmental Activities Contracts Payable 3,492,000 3,600,000 Contracts PayableRetained Percentage 108,000 Cash 3,492,000 k. Grant funds totaling $3,200,000 are received from the state historical society because eligible expenditures have been made. k Debt Service fund No Journal Entry Required Capital Projects Fund Cash 3,200,000 Revenues Governmental Activities Cash 3,200,000 3,200,000 Program RevenueGeneral Government 3,200,000 l. At year-end, closing entries are made; In the capital projects fund, $3,000,000 of the fund balance is assigned, and the remainder is restricted. l(1) Debt Service fund Appropriations Budgetary Fund Balance 54,000 398,000 Estimated Revenues 380,000 Estimated Other Financing SourcesPremium on Bonds l(2) 72,000 Record the entry to close the operating statement account in the Debt Service Fund. Revenues Other Financing SourcesPremium on Bonds Payable 150,000 72,000 ExpendituresInterest 54,000 Fund BalanceRestricted l(3) Capital Projects Fund 398,000 Record the entry to close the budgetary statement account in the Capital Projects Fund. Revenues 3,200,000 Other Financing SourcesInterfund Transfers In 3,000,000 Other Financing SourcesProceeds of Bonds 3,600,000 Construction Expenditures 3,860,000 Fund BalanceRestricted 2,940,000 Fund BalanceAssigned 3,000,000 m. Record the 2021 budget for the Serial Debt Service Fund; $340,000 of earmarked sales taxes are expected to be collected in 2021; appropriations include a $360,000 principal payment on April 1 and two serial bond interest payments. m Debt Service fund Estimated Revenues 340,000 Budgetary Fund Balance 122,600 Appropriations Capital Projects Fund 462,600 No Journal Entry Required Governmental Activities No Journal Entry Required n. Sales tax collections for debt service amounted to $360,000. n Debt Service fund Cash 360,000 Revenues Capital Projects Fund 360,000 No Journal Entry Required Governmental Activities Cash General RevenuesTaxes 360,000 360,000 o Central Paving and Construction submitted a final billing to the town for $2 900 000 Upon final inspection by the Public Works Department a https://ezto.mheducation.com/hm.tpx?todo=c15SinglePrintView&singleQuestionNo=2.&postSubmissionView=13252712110183095&wid=1325271338... 3/5 5/7/2020 Assignment Print View o. Central Paving and Construction submitted a final billing to the town for $2,900,000. Upon final inspection by the Public Works Department, a leak was discovered in the roof. o Debt Service fund No Journal Entry Required Record the reversal of encumbrances for the progress to date on the project and also the construction expenditure for the invoice received. Capital Projects Fund Encumbrances Outstanding 2,900,000 Construction Expenditures 2,900,000 Encumbrances 2,900,000 Contracts Payable 2,900,000 Governmental Activities Construction Work in Progress 2,900,000 Contracts Payable 2,900,000 p. Public works employees installed a new sidewalk and landscaping at a total cost of $80,000. p Debt Service fund No Journal Entry Required Capital Projects Fund Construction Expenditures 80,000 Cash Governmental Activities Construction Work in Progress 80,000 80,000 Cash 80,000 q. The roof leak was repaired satisfactorily, and the city paid the final billing and all retainages. q Debt Service fund No Journal Entry Required Capital Projects Fund Contracts Payable Contracts PayableRetained Percentage 2,900,000 108,000 Cash Governmental Activities Contracts Payable Contracts PayableRetained Percentage 3,008,000 2,900,000 108,000 Cash 3,008,000 r. The April 1 debt service payments are made. r Debt Service fund ExpendituresInterest 54,000 ExpendituresPrinicpal 360,000 Cash Capital Projects Fund 414,000 No Journal Entry Required Governmental Activities Premium on Bonds Payable ExpensesInterest on Long-term debt Bonds Payable 1,800 52,200 3,600,000 Cash 3,654,000 s. The renovation is considered complete and appropriate amounts are reclassified as buildings and improvements other than buildings (i.e., landscaping). s(1) Debt Service fund Cash Other Financing SourcesInterfund Transfers In All capital projects fund nominal accounts are closed, and remaining cash in the capital projects fund is transferred to the debt service fund. (Remember to amend the debt service fund budget because this transfer was not anticipated.) s(2) Estimated Other Financing SourcesInterfund Transfers In Budgetary Fund Balance s(3) Capital Projects Fund Record the receipt for debt service payments. Fund BalanceRestricted Fund BalanceAssigned Construction Expenditures 2,940,000 40,000 2,980,000 https://ezto.mheducation.com/hm.tpx?todo=c15SinglePrintView&singleQuestionNo=2.&postSubmissionView=13252712110183095&wid=1325271338... 4/5 5/7/2020 Assignment Print View s(4) Record the transfer of capital project funds to the debt service fund. Other Financing SourcesInterfund Transfers Out s(5) s(6) Record the closing entry after transfer out. Governmental Activities Record the closing entry and reclassify the appropriate amounts. References Journal Entries Learning Objective: 06-02 Prepare note disclosures for general long-term debt, including schedules of statutory debt limits, debt margin, and overlapping debt. Difficulty: 3 Hard Learning Objective: 06-05 Make journal entries to account for general long-term liabilities in debt service funds and in the governmental activities general journal. https://ezto.mheducation.com/hm.tpx?todo=c15SinglePrintView&singleQuestionNo=2.&postSubmissionView=13252712110183095&wid=1325271338... 5/5