Chapter $5$ Recording Capital Asset Transactions

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

During late $2022,$ the voters of the City of Smithville authorized tax$-$supported bond issues totaling $$9,000,000$ as partial financing for projects to construct the extension of two streets and the related curbs, culverts, and storm sewers in the city. The estimated total cost of the projects, which are expected to extend over the next three years, was $$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 $1,2023$ and will continue for seven years. The sales tax is projected to generate $$380,000$ 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 drop down $[$Account$]$ menu. Be sure the year $2023$ is selected from the dropdown $[$Year$]$ menu and the appropriate paragraph number shown in bold$-$face font below is in the $[$Add description$]$ box.

$[$Para$.5-$a$-1]$ In early $2023,$ 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 $$110,000.$

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 February $1,2023,2\mathrm{.}5\%$ deferred serial bonds with a face value of $$3,000,000$ were sold for a total amount of $$3,036,250,$ of which $$6,250$ was for accrued interest from the January $1,2023$ date of the bonds and $$30,000$ 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 $$3,000,000$ was deposited and recorded in the Street Improvement Fund.

Required: Record these transactions in the Street Improvement Fund and governmental activities journals. 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 Expenses$$Interest on Long$-$term Debt$)$in the governmental activities general journal for the $$6,250$ of accrued interest.$)$ For now you should not make the entries in the Street Improvement Bond Debt Service Fund to record the accrued interest and premium. Those entries will be made in Chapter $6$ of this cumulative problem.

$[$Para$.5-$a$-3]$ On February $21,2023,$ construction bids were opened and analyzed. A bid of $$3,300,000$ was accepted, and the contract was awarded for the Elm Street Project. The contract provided for a retained percentage of $5$ percent from each progress payment, and from the final payment, until final inspection and acceptance by the city$$s 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$-4]$ Sales tax revenue of $$83,000$ was received.

Required: Record this transaction in both the Street Improvement Fund and governmental activities general journals.

$[$Para$.5-$a$-5]$ Vouchers payable accumulated to date were paid on March $30,2023.$

Required: Record this transaction in both the Street Improvement Fund and governmental activities general journals.

$[$Para$.5-$a$-6]$ July $6,2023,$ the contractor for the Elm Street Project reported that the project was about one$-$half completed and requested a progress payment of $$1,600,000.$ This amount was paid July $25,2023,$ less the $5\%$ retained percentage.

Required: Record these transactions in both the Street Improvement Fund and governmental activities general journals.

$[$Para$.5-$a$-7]$ Additional sales taxes were collected in the amount of $$278,000$ on December $1,2023.$

Required: Record this transaction in both the Street Improvement Fund and governmental activities journals.

$[$Para$.5-$a$-8]$ On December $10,2023$ the Elm Street project was completed and the contractor for the project requested a final payment of $$1,650,000.$ This amount was recorded as a liability. Payment was made, less the retained percentage, on December $15,2023.$

Required: Record these transactions in both the Street Improvement Fund and governmental activities journals. Because the project is completed, all encumbrances for the project should be closed.

$[$Para$.5-$a$-9]$ The city submitted a $$190,000$ purchase order for design plans and specifications