How do you prepare journal entries to record the following transactions of a state, identifying the

funds affected by each transaction? I have to record journal entries for all funds affected. The

state prepares a budget for the Capital Projects Fund and uses encumbrance accounting

in that fund.

a. The state records its capital budget. It appropriates $10 million for

highway construction, which will be financed entirely with the issuance of

bonds.

b. The state sells 20-year 6% bonds having a face value of $10 million. The

bonds are sold at a discount, so the state realizes a total of $9,900,000.

Equal installments of principal will be paid every six months, together

with interest on the unpaid balance.

c. The state awards two contracts, one for highway construction

($6,500,000) and one for construction supervision ($350,000). Both

contracts provide for progress payments. The highway construction

contract provides for 10% retainage pending completion of the project.

There is no retainage on the construction supervision contract.

d. The construction contractor submits an invoice for $1,500,000. The

invoice is approved and a voucher is prepared, less the 10% retainage.

e. The construction supervisor submits an invoice for $100,000, and a

voucher is prepared.

f. Both of the invoices in transactions d. and e. are paid.

g. The state transfers $800,000 from the General Fund to the Debt Service

Fund in anticipation of the payment of debt service on the bonds.

h. The first semi-annual debt service on the 20-year bonds becomes due and

payable (see transaction b).

i.

The debt service is paid.