Chapter 5 Recording Capital Asset Transactions Street Improvement Capital Projects Fund and Governmental Activities at the Government wide Level During late 2019, the voters of the City of Smithville authorized tax supported bond issues totaling $8,000,000 as partial financing for projects to construct the extension of streets and the related curbs, culverts, and storm sewers in the city The estimated total cost of the projects, which are expected to extend over the next three years, was $11,200,000 In addition to the bond financing, voters also approved a special 1 cent sales tax to assist in financing the projects The sales tax begins January 1, 2020 and will continue for seven years The sales tax is projected to generate $550,000 each year Required Prepare general journal entries as necessary to record the transactions described below in the Street Improvement Fund general journal and, if applicable, in the governmental activities general journal Do not record entries at this time in other affected funds those entries will be made in the later chapters of this cumulative problem that cover the affected funds Use account titles listed under the dropdown 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 Para 5 a 1 In early 2020, design plans and specifications for the first project, the Elm Street Project, were submitted by a construction engineering firm The firm billed the Street Improvement Fund for $150,000 Required Record this billing and the related Vouchers Payable liability in the Street Improvement Fund and governmental activities journals (Note this transaction was not encumbered ) Para 5 a 2 On March 15, 2020, construction bids were opened and analyzed A bid of $2,400,000 was accepted, and the contract was awarded for the Elm Street Project The contract provided for a retained percentage of 5 percent from each progress payment, and from the final payment, until final inspection and acceptance by the citys public works inspectors Required Record the signing of the contract in the Street Improvement Fund general journal This transaction has no effect at the government wide level Para 5 a 3 On April 1, 2020, 2 5 deferred serial bonds with a face value of $2,000,000 were sold for a total amount of $2,032,500, of which $12,500 was for accrued interest from the January 1, 2020 date of the bonds and $20,000 was a premium on the bonds sold Cash in the amount of the accrued interest and premium was deposited directly in the Street Improvement Bond Debt Service Fund Cash in the amount of $2,000,000 was deposited and recorded in the Street Improvement Fund Required Record this transaction in the Street Improvement Fund and governmental activities journals (Hint In addition to recording the liability for bonds payable in the governmental activities journal, you should record the premium on the bonds payable credit Premium on Deferred Serial Bonds and accrued interest on bonds sold we recommend that you credit ExpensesInterest on Long term Debt in the governmental activities general journal for the $12,500 of accrued interest ) For now you should not make the entry in the Street Improvement Bond Debt Service Fund to record the accrued interest and premium That entry will be made in Chapter 6 of this cumulative problem Para 5 a 4 Vouchers payable (see Transaction 1) were paid on April 20, 2020 Required Record this transaction in both the Street Improvement Fund and governmental activities general journals Para 5 a 5 In July 2020, the contractor for the Elm Street Project reported that the project was one half completed and requested a progress payment of $1,200,000 Required Record the liability for the progress billing in both the Street Improvement Fund and governmental activities general journals Para 5 a 6 The billing for the partially completed Elm Street Project (see Transaction 5) was paid in late July, less the contractual retention of 5 percent Required Record this transaction in both the Street Improvement Fund and governmental activities general journals Para 5 a 7 On December 10, 2020 the Elm Street Project was completed and the contractor for the project requested a final payment of $1,200,000 This amount was recorded as a liability Required Record the liability for the final billing in both the Street Improvement Fund and governmental activities journals Para 5 a 8 During the year sales taxes were collected in the amount of $560,000 Required Make the summary journal entries in both the Street Improvement Fund and governmental activities journals to record the collection of sales taxes Para 5 a 9 Payment was made for the final billing on the Elm Street Project, less the retained percentage, on December 1, 2020 Required Record this transaction in both the Street Improvement Fund and governmental activities journals Para 5 a 10 Upon final inspection of the Elm Street Project, the city inspector determined that all work conformed to specifications Retained percentages (Transactions 6 and 7) were paid to the contractor Required Record this transaction in both the Street Improvement Fund and governmental activities journals Total construction expenditures for the Elm Street Project should be capitalized in the Infrastructure account in governmental activities Verify the accuracy of all your preceding entries in the Street Improvement Fund and governmental activities general journals, then click Post entries button of each entity to post the entries to the respective general ledgers For the Street Improvement Fund only, prepare year end closing entries for 2020 and post them to the funds general ledger Accounts should be closed to Fund BalanceRestricted (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 check mark is present for each account being closed ) Click the Post entries button to post the closing entry Cash remaining in the Street Improvement Fund at year end is not transferred to the debt service fund since other street improvement projects will be undertaken during the next two years Closing entries will be made in the governmental activities general journal in Chapter 9 of this cumulative problem Ignore those entries for now

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Chapter 5 Recording Capital Asset Transactions Street Improvement Capital Projects Fund and Governmental Activities at the Government-wide Level During late 2019, the voters of the

Chapter 5 Recording Capital Asset Transactions

Street Improvement Capital Projects Fund and Governmental Activities at the Government-wide Level

During late 2019, the voters of the City of Smithville authorized tax-supported bond issues totaling $8,000,000 as partial financing for projects to construct the extension of streets and the related-curbs, culverts, and storm sewers in the city. The estimated total cost of the projects, which are expected to extend over the next three years, was $11,200,000. In addition to the bond financing, voters also approved a special 1 cent sales tax to assist in financing the projects. The sales tax begins January 1, 2020 and will continue for seven years. The sales tax is projected to generate $550,000 each year.

Required

Prepare general journal entries as necessary to record the transactions described below in the Street Improvement Fund general journal and, if applicable, in the governmental activities general journal. Do not record entries at this time in other affected funds; those entries will be made in the later chapters of this cumulative problem that cover the affected funds. Use account titles listed under the dropdown [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. 5-a-1] In early 2020, design plans and specifications for the first project, the Elm Street Project, were submitted by a construction engineering firm. The firm billed the Street Improvement Fund for $150,000.
  
  Required: Record this billing and the related Vouchers Payable liability in the Street Improvement Fund and governmental activities journals. (Note: this transaction was not encumbered.)
2. [Para. 5-a-2] On March 15, 2020, construction bids were opened and analyzed. A bid of $2,400,000 was accepted, and the contract was awarded for the Elm Street Project. The contract provided for a retained percentage of 5 percent from each progress payment, and from the final payment, until final inspection and acceptance by the citys public works inspectors.
  
  Required: Record the signing of the contract in the Street Improvement Fund general journal. This transaction has no effect at the government-wide level.
3. [Para. 5-a-3] On April 1, 2020, 2.5% deferred serial bonds with a face value of $2,000,000 were sold for a total amount of $2,032,500, of which $12,500 was for accrued interest from the January 1, 2020 date of the bonds and $20,000 was a premium on the bonds sold. Cash in the amount of the accrued interest and premium was deposited directly in the Street Improvement Bond Debt Service Fund. Cash in the amount of $2,000,000 was deposited and recorded in the Street Improvement Fund.
  
  Required: Record this transaction in the Street Improvement Fund and governmental activities journals. (Hint: In addition to recording the liability for bonds payable in the governmental activities journal, you should record the premium on the bonds payable [credit Premium on Deferred Serial Bonds] and accrued interest on bonds sold [we recommend that you credit ExpensesInterest on Long-term Debt] in the governmental activities general journal for the $12,500 of accrued interest.) For now you should not make the entry in the Street Improvement Bond Debt Service Fund to record the accrued interest and premium. That entry will be made in Chapter 6 of this cumulative problem.
4. [Para. 5-a-4] Vouchers payable (see Transaction 1) were paid on April 20, 2020.
  
  Required: Record this transaction in both the Street Improvement Fund and governmental activities general journals.
5. [Para. 5-a-5] In July 2020, the contractor for the Elm Street Project reported that the project was one-half completed and requested a progress payment of $1,200,000.
  
  Required: Record the liability for the progress billing in both the Street Improvement Fund and governmental activities general journals.
6. [Para. 5-a-6] The billing for the partially completed Elm Street Project (see Transaction 5) was paid in late July, less the contractual retention of 5 percent.
  
  Required: Record this transaction in both the Street Improvement Fund and governmental activities general journals.
7. [Para. 5-a-7] On December 10, 2020 the Elm Street Project was completed and the contractor for the project requested a final payment of $1,200,000. This amount was recorded as a liability.
  
  Required: Record the liability for the final billing in both the Street Improvement Fund and governmental activities journals.
8. [Para. 5-a-8] During the year sales taxes were collected in the amount of $560,000.
  
  Required: Make the summary journal entries in both the Street Improvement Fund and governmental activities journals to record the collection of sales taxes.
9. [Para. 5-a-9] Payment was made for the final billing on the Elm Street Project, less the retained percentage, on December 1, 2020.
  
  Required: Record this transaction in both the Street Improvement Fund and governmental activities journals.
10. [Para. 5-a-10] Upon final inspection of the Elm Street Project, the city inspector determined that all work conformed to specifications. Retained percentages (Transactions 6 and 7) were paid to the contractor.
  
  Required: Record this transaction in both the Street Improvement Fund and governmental activities journals. Total construction expenditures for the Elm Street Project should be capitalized in the Infrastructure account in governmental activities.
11. Verify the accuracy of all your preceding entries in the Street Improvement Fund and governmental activities general journals, then click [Post entries] button of each entity to post the entries to the respective general ledgers. For the Street Improvement Fund only, prepare year-end closing entries for 2020 and post them to the funds general ledger. Accounts should be closed to Fund BalanceRestricted. (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 check mark is present for each account being closed.) Click the [Post entries] button to post the closing entry. Cash remaining in the Street Improvement Fund at year-end is not transferred to the debt service fund since other street improvement projects will be undertaken during the next two years. Closing entries will be made in the governmental activities general journal in Chapter 9 of this cumulative problem. Ignore those entries for now.