Chapter 5 Recording Capital Asset Transactions Street Improvement Capital Projeets 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 stom 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 a. Prepare general joumal entries as necessary to record the transactions described below in the Street improvement Fund general journal and, if applicable, in the governmental activities general joumal. 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 drop-down [Year] menu and the appropriate paragraph number shown in bold-face font below is in the [Add description] box. 1. |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 govermmental activities jourmals. (Note: this transaction was not encumbered.) 2. [Para. 5-a-2] On February 1, 2023, 2.5\% 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 acerued 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 journit, you should record the premium on the bonds payable (credit Premium on Deferred Scrist Bonds) and accrued interest on bonds sold (we recommend that you credit Experses-interest on Long-term Debt)in the govermental activities general joumal for the 56,250 of acerued 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. 3. [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 joumal. This transaction has no effect at the government-wide level. 4. [Para. 5-a-4] Sales tax revenue of $83,000 was received. Required: Record this tran-action in both the Street Improvement Fund and governmental activities general journals. 5. [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 joumals. 6. [Para. 5-a-6] July 6, 2023, the contractor for the Elm Street Project reported that the project was about one-haif 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 transuctions in both the Street Improvement Fund and governmental activities general joumals. 7. [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 journais. 8. [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 joumals. Because the project is completed, all encumbrances for the project should be closed. 9. [Para. 5-a-9] The city submitted a $190,000 purchase order for design plans and specifications for the second street improvement project, the "Spruce Street Project." Required: Record this encumbrance in the Street Improvement Fund. 10. [Para. 5-a-10] The city engineer approved the final construction on the Elm Street Project, and the city paid the retained percentage (Transactions 6 and 8) to the contractor. Required: Record this transaction in both the Street Improvement Fund and governmental activities journals. Total construction costs for the Elm Street Project should be capitalized in the Infrastructure account in governmental activities