Hi,

I received this as an answer to a question that I submitted a few days ago, but I do not understand some of it. Can you please help me to understand why in (c. Prepare a balance sheet) I include premium on bonds in my liabilities? Also, where did you get the Projected fund balance amount (how do I calculate this)? I would really appreciate any help that you can give me so that I can understand this. Thank you.

The citizens of Spencer County approved the issuance of $2,000,000 in 6 percent general obligation bonds to finance the construction of a courthouse annex. A capital projects fund was established for that purpose. The preclosing trial balance of the courthouse annex capital project fund follows:

Trial Balance-December 31, 2015	Debits	Credits
Cash	$900,000
Contract payable		$550,000
Due from state government	200,000
Encumbrances	85,000
Expenditures-capital	1,850,000
Intergovernmental grant		400,000
OFS: premium on bonds		45,000
OFS: proceeds sale of bonds		2,000,000
Budgetary fund balance- Reserve for encumbrances		85,000
Transfer out	45,000
	$3,080,000	$3,080,000

a. Prepare any closing entries necessary at year-end.

Answer:

Closing Entry Transactions	Debits	Credits
Intergovernmental Grant	$400,000
OFS: Premium on Bonds	45,000
OFS: Proceeds Sale of Bonds	2,000,000
Expenditures-Capital Outlay		$1,850,000
Transfer Out		45,000

b. Prepare a Statement of Revenues, Expenditures, and Changes in Fund Balance for the courthouse annex capital project fund.

Answer:

SPENCER COUNTY Statement of Revenues, Expenditures, and Changes in Fund Balances Courthouse Annex Capital Project Fund For the Year Ended December 31, 2015
	Debits	Credits
Revenues:
Intergovernmental Grant		$400,000
Capital Project Fund Additions		1,880,000
Interest on Bonds		120,000
Total Revenues		$2,400,000
Expenditures:
Capital Expenditures	$1,850,000
Transfer Out	45,000
Total Expenditures	$1,895,000
Net Change in Fund Balance		505,000
Beginning Fund Balance		2,000,000
Fund Balance, December 31, 2015		2,505,000

c. Prepare a balance sheet for the Courthouse Annex Capital Project Fund, assuming all unexpended resources are restricted to construction of the courthouse annex.

Answer:

SPENCER COUNTY Balance Sheet Courthouse Annex Capital Project Fund As of December 31, 2015
Assets
Cash	$900,000
Due from State Government	200,000
Total Assets		$1,100,000
Liabilities and Fund Balance
Liabilities:
Contract Payable	$550,000
Project Fund Balance	505,000
OFS: Premium on Bonds	45,000
Total Fund Balance		1,100,000
Total Liabilities and Fund Balance		$1,100,000