Journal entries and financial statements for an Enterprise Fund

The City of Whitt Falls plans to develop a golf course during 2018 and account for it as the Golf Enterprise Fund (GEF). The course will be built on a parcel of land to be purchased from a private party. The planned out-of-pocket costs for the new course and their financing are as follows:

The City plans to sell the bonds on February 1, 2018. Because the bonds are a term issue, bond principal matures in full on February 1, 2028. Interest is payable each August 1 and February 1, beginning August 1, 2018. The bond covenant requires that assets equal to one-tenth of the bond principal be transferred to a restricted account within the GEF on December 31 of each year. Whitt observes a calendar fiscal year.

Simmons Design and Construction, Inc. (Simmons) has been awarded the contract to develop the golf course. Construction will commence February 15, 2018, and be completed no later than May 31, so it can open for business during June. The contract stipulates that progress billings from Simmons will be paid within 30 days of receipt, with 5 percent retainage held pending completion and acceptance of the project. The city engineer will inspect the contractors work and approve progress payments.

Accounting for the GEF will be done by the citys existing accounting department (a General Fund department), which will bill the GEF for services rendered at the end of the year. To help the GEF get on its feet financially, no interfund payables will be settled in cash during 2018.

Prepare (a) journal entries (including closing entries) to record the following events and transactions for the year ended December 31, 2018, in the GEF. The corresponding entries that would be made in other funds are not required. In addition, prepare (b) the statement of net position and (c) the statement of revenues, expenses, and changes in net position for the GEF as of and for the fiscal year ending December 31, 2018.

1. January 3, 2018: Whitt Falls formally established the GEF; the funds first transaction was the receipt, in cash, of the capital contribution from the General Fund.

2. January 24: The city acquired the adjacent parcel of land from the private owner for the planned $500,000.

3. February 1: The revenue bonds were sold at par ($3,000,000).

4. February 15: Development of the golf course itself and construction of the clubhouse commenced.

5. March 31: Simmons submitted the first progress billing of $1,800,000. The billing was approved and set up as a construction contracts payable after deducting the 5 percent retainage. (Because of the short duration of the construction period, no construction in progress accounts will be used.) $400,000 of the amount billed represents the cost of sod, sprinklers, landscaping, and fencing (which the city classifies as improvements other than buildings). The balance applies to the cost of the clubhouse (buildings).

6. April 25: The construction contracts payable currently due Simmons was paid.

7. April 30: The second progress billing from Simmons, $1,500,000, was approved and set up as a construction contracts payable after deducting the 5 percent retainage; $600,000 applies to sod, sprinklers, landscaping, and fencing (which is now fully installed), with the remainder to the clubhouse building.

8. May 19: The construction contracts payable currently due Simmons was paid.

9. May 23: Simmons third and final progress billing, $700,000 (all of which represents clubhouse construction costs), was approved and set up as a construction contracts payable after deducting the 5 percent retainage.

10. May 30: The construction contracts payable currently due Simmons was paid.

11. June 1: The new golf course was formally accepted by the City (without need for touch-up work), and all remaining amounts due to Simmons were paid.

12. June 1: The City acquired golf course maintenance equipment by entering into a 4-year financing lease. The first lease payment of $50,000 was paid on June 2 when the equipment was delivered. The remaining lease payments of $50,000 each will occur on the first, second, and third anniversary of the first payment. Assume that the interest rate on the lease is 4 percent.

13. June 2: Inventory in the amount of $12,000 was acquired for the pro shop; the purchase created an accounts payable.

14. June 4: The course opened for business. Greens fees (charges for services) aggregated $209,000 for June. Pro shop sales (all for cash) amounted to $5,000.

15. June 30: Expenses for June were as follows. (Charge all expenses to Operating expensescost of sales.)

16. August 1: The first debt service payment on the revenue bonds was made.

17. December 31: Greens fee revenues for the second half of 2018 totaled $370,000; pro shop sales for the same period were $21,200.

18. December 31: Second-half 2018 expenses were as follows:

19. December 31: Interest was accrued on the revenue bonds.

20. December 31: The GEF recorded depreciation for 2018 as follows:

21. December 31: The GEF recorded amortization on the intangible asset lease of $23,594.

22. December 31: The restricted asset accountCash restricted for bond principal retirementwas established in accordance with the requirements of the bond covenant.

Notes: 1. If no entry is required for a transaction, select "No entry" as your answers and leave the Debit and Credit answers blank (zero). 2. Round answers to the nearest whole number, when applicable.

Spending Acquisition of land from private party $ 500,000 Installation of sod, sprinklers, landscaping, and fencing 1,000,000 Construction of clubhouse 3,000,000 Total spending $4,500,000 Capital Financing Contribution from the General Fund Term revenue bonds at 8 percent per annum, interest payable semiannually Total capital financing $1,500,000 3,000,000 $4,500,000 $48,000 4,000 Maintenance and pro shop labor (paid in cash) Maintenance supplies, from the Parks Department-a Special Revenue Fund (invoice received, but not paid) Water, supplied by the Whitt Falls water utility-an Enterprise Fund (invoice received, but not paid) Cost of merchandise sold by the pro shop 80,000 2,200 $70,000 4,000 Maintenance and pro shop labor (paid in cash) Maintenance supplies, from the Parks Department-a Special Revenue Fund (invoice received, but not paid) Water, supplied by the Whitt Falls water utility-an Enterprise Fund (invoice received, but not paid) Cost of merchandise sold by the pro shop Accounting and administrative services provided by the accounting department-General Fund (invoice received, but not paid) Total expenses 80,000 2,900 9,000 $165,900 Building: Improvements $35,000 25,000 Spending Acquisition of land from private party $ 500,000 Installation of sod, sprinklers, landscaping, and fencing 1,000,000 Construction of clubhouse 3,000,000 Total spending $4,500,000 Capital Financing Contribution from the General Fund Term revenue bonds at 8 percent per annum, interest payable semiannually Total capital financing $1,500,000 3,000,000 $4,500,000 $48,000 4,000 Maintenance and pro shop labor (paid in cash) Maintenance supplies, from the Parks Department-a Special Revenue Fund (invoice received, but not paid) Water, supplied by the Whitt Falls water utility-an Enterprise Fund (invoice received, but not paid) Cost of merchandise sold by the pro shop 80,000 2,200 $70,000 4,000 Maintenance and pro shop labor (paid in cash) Maintenance supplies, from the Parks Department-a Special Revenue Fund (invoice received, but not paid) Water, supplied by the Whitt Falls water utility-an Enterprise Fund (invoice received, but not paid) Cost of merchandise sold by the pro shop Accounting and administrative services provided by the accounting department-General Fund (invoice received, but not paid) Total expenses 80,000 2,900 9,000 $165,900 Building: Improvements $35,000 25,000