Chapter 5 Recording Capital Asset and Capital Project Transactions City Hall Annex Construction Fund and Governmental

During fiscal year 2019, the voters of the City of Bingham approved the issuance of 3 percent tax-supported serial bonds in the face amount of $7,500,000 to construct and equip an annex to the City Hall. The bonds are to mature in blocks of $312,500 every six months over a 12-year period commencing January 1, 2021.

Required

1. Prepare general journal entries as necessary to record the following transactions in the general journals of the City Hall Annex Construction Fund and, if applicable, in the governmental activities general journal at the government-wide level. Do not record entries at this time in any other affected funds; those entries will be made in later chapters of this cumulative problem that cover those funds. Use account titles listed under the drop-down [Account] menu. Be sure the year 2020 is selected from the dropdown [Year] menu and the appropriate paragraph number shown in bold-face font below is in the [Description] field.

1. [Para. 5a-1] On the first day of the 2020 fiscal year (January 1, 2020), the bond issue was sold at 101. Cash in the face amount of the bonds, $7,500,000, was deposited in the City Hall Annex Construction Fund; the premium was deposited in the debt service fund, as required by state law.

Required: Record these transactions in the City Hall Annex Construction Fund and governmental activities journals. (Hint: In addition to recording the liability for 3% serial bonds payable in the governmental activities journal, you should record the premium on the bonds payable [credit Premium on Serial Bonds Payable] in the governmental activities general journal.) Wait until instructed in Chapter 6 to make the corresponding entry in the debt service fund.

2. [Para. 5a-2] The city invested $5,000,000 of the bond proceeds in 90-day notes.

Required: Record this transaction in both the City Hall Annex Construction Fund and governmental activities general journals.

3. [Para. 5a-3] The City Hall Annex Construction Fund purchased land for the annex for $450,000. This amount was vouchered.

Required: Record this transaction in both the City Hall Annex Construction Fund and governmental activities general journals. In the governmental activities general journal at the government-wide level, this purchase should be debited to Land. (Note: This transaction was not encumbered.)

4. [Para. 5a-4] A contract for architectural services was signed at an estimated amount of $350,000 for the design of the City Hall Annex.

Required: Record the encumbrance in the City Hall Annex Construction. This transaction has no effect at the government-wide level.

5. [Para. 5a-5] Legal and other capitalizable costs of the bond issue were vouchered in the amount of $165,000.

Required: Record this transaction in both the City Hall Annex Construction Fund and governmental activities general journals. (Note: This transaction was not encumbered.)

6. [Para. 5a-6] Preliminary plans were received (related to the contract signed in paragraph 5a-4) for which architectural fees of $103,000 were vouchered.

Required: Eliminate the encumbrance and record a Vouchers Payable liability in the City Hall Annex Construction Fund and governmental activities journals, as appropriate.

7. [Para. 5a-7] Construction bids were opened and analyzed. A contract was signed with the firm that submitted the winning bid of $6,000,000. A provision of the contract permits the city to withhold 5 percent of payment pending final acceptance of the completed project.

Required: Record the signing of the contract in the City Hall Annex Construction Fund general journal. This transaction has no effect at the government-wide level.

8. [Para. 5a-8] Vouchers payable were recorded in the amount of $240,000 for the final architectural plans and specifications for the construction project (see para. 5a-4).

Required: Eliminate the remaining encumbrance for the architectural services and record a Vouchers Payable liability in the City Hall Annex Construction Fund and governmental activities journals, as appropriate.

9. [Para. 5a-9] The 90-day notes matured, paying $37,500 in interest (see para. 5a-2).

Required: Record this transaction in both the City Hall Annex Construction Fund and governmental activities general journals. The interest should be recorded as general revenue in the governmental activities journal.

10. [Para. 5a-10] The contractor submitted a billing for $3,000,000. This amount was recorded as a contract payable.

Activities at the Government-wide Level 8. [Para. 5a-8] Vouchers payable were recorded in the amount of $240,000 for the final architectural plans and specifications for the construction project (see para. 5a-4). Required: Eliminate the remaining encumbrance for the architectural services and record a Vouchers Payable liability in the City Hall Annex Construction Fund and governmental activities journals, as appropriate. 9. [Para. 5a-9] The 90-day notes matured, paying $37,500 in interest (see para. 5a-2). Required: Record this transaction in both the City Hall Annex Construction Fund and governmental activities general journals. The interest should be recorded as general revenue in the governmental activities journal. 10. [Para. 5a-10] The contractor submitted a billing for $3,000,000. This amount was recorded as a contract payable. Required: Record this transaction in both the City Hall Annex Construction Fund and governmental activities general journals. 11. [Para. 5a-11] The contractors billing (see para. 5a-10) was paid, less a 5 percent retained percentage. Required: Record this transaction in both the City Hall Annex Construction Fund and governmental activities general journals. 12. [Para. 5a-12] All pending vouchers were approved and paid. Required: Record this transaction in both the City Hall Annex Construction Fund and governmental activities general journals. 13. [Para. 5a-13] Furniture and equipment for the annex were ordered at an estimated total cost of $475,000. Required: Record this transaction in the City Hall Annex Construction Fund. It has no effect on the governmental activities general journal. 14. [Para. 5a-14] The contractor completed construction, submitted the final bill, and requested payment of the balance due. A liability was recorded in the amount of $3,100,000. Required: Record this transaction in both the City Hall Annex Construction Fund and governmental activities general journals. The encumbrance account should be reduced by the remaining $3,000,000 construction contract balance. 15. [Para. 5a-15] After final inspection, a final payment was made to the contractor, including the amount retained in para. 5a-11. Required: Record this transaction in both the City Hall Annex Construction Fund and governmental activities general journals. 16. [Para. 5a-16] Furniture and equipment were received (see para. 5a-13) at a total cost of $475,500. Invoices were vouchered for payment. Required: Record this transaction in both the City Hall Annex Construction Fund and governmental activities general journals. This amount exceeds the citys capitalization threshold, so Equipment should be debited. 17. [Para. 5a-17] The City Hall Annex Construction Fund paid all outstanding liabilities on December 31, 2020. Required: Record this transaction in both the City Hall Annex Construction Fund and governmental activities general journals. Total construction costs for the City Hall Annex Construction Project should be capitalized in the Buildings account in governmental activities. 18. [Para. 5a-18] Remaining cash in the City Hall Annex Construction Fund was transferred to the debt service fund. Required: Record this transaction in the City Hall Annex Construction Fund. Do not record the transfer in the debt service fund until you are instructed to do so in Chapter 6. This transaction involves two governmental funds, thus it has no effect on the governmental activities general journal. 19. Verify the accuracy of all your preceding entries in the general journals of the City Hall Annex Construction Fund and governmental activities at the government-wide level, then click [Post entries] of each entity to post the entries to the respective general ledgers. For the City Hall Annex Construction Fund only, prepare year-end closing entries for 2020 and post them to the funds general ledger. (Note: You must click on the box for [Closing Entry] to checkmark it; Closing Entry checkbox will appear next to the [Add credit] field for the account being closed. Be sure the checkmark is present for each account being closed.) Click [Post entries] to post the closing entry. Closing entries will be made in the governmental activities general journal in Chapter 9 of this cumulative problem. Ignore those entries for now. c. Export the pre-closing trial balance for year 2020 to an Excel worksheet to prepare a statement of revenues, expenditures, and changes in fund balances for the City Hall Annex Construction Fund for the year ended December 31, 2020. (See Illustration 5-3 in the textbook for an example of the format of a capital projects fund statement of revenues, expenditures and changes in fund balance.). Save and print the pre-closing trial balance from the [Reports] menu. (Note: A balance sheet is not required since the capital project fund was closed prior to end of FY 2020.)