P6-47. (Journal entries and financial statements-Capital Projects Fund) The following transactions occurred during 2018 I. The City of Watersville approved the construction of an enclosed concert arena for a total cost of $75,000,000 in order to attract professional events. On the same day, a contract with a 6 percent retainage clause was signed with V.P. Construction Company for the arena. The arena will be financed by a $75,000,000 general obligation bond issue. Investment revenue of $4,000,000 was also included in the budget. (Assume that the budget is recorded in the accounts and encumbrance accounting is used.) 2. Watersville received $76,000,000 from the sale of bonds, which included a premium of $1,000,000 over the $75.000,000 face value. The $1,000.000 premium was transferred immediately to the ap- propriate Debt Service Fund. The city invested $74,900,000 in securities. The contract signed with V.P. stipulated that the contract price included the architect fees. The architects were paid their fee of $25,000 by Watersville. (Assume that a vouchers payable account was not used.) The contractor submitted a progress billing of $3,000,000 the billing (less a 6 percent retainage) was approved. Investments that cost $3,000,000 were redeemed for $3,000,000 plus $50,000 interest. V. P was paid the amount due in transaction 5 less the retainage. Income totaling $3,700,000 was received on the investments. V. P submitted another progress billing of $8,000.000. The billing, less the retainage, was approved. Investments originally costing $7,800,000 were redeemed to make the payment to V.P. Cash pro- ceeds of $8,100,000 were received 11. The contractor was paid the amount due in transaction 9 less the retainage 12. Interest income of $60,000 was accrued. 13. Interest income of $10,000 was received in cash. Use the preceding information to do the following: a. Prepare the journal entries necessary to record these transactions in the Capital Projects Fund. As sume that the city operates on a calendar year b. Prepare a trial balance for the Capital Projects Fund as of December 31, 2018, before closing. Prepare any necessary closing entries. The debt covenant for the general obligation bonds states that the bond proceeds and any earnings from investing the proceeds must be used for the construction of th e arena. If any unused bond proceeds or related investment earnings remain at completion of d. Prepare a statement of revenues, expenditures, and changes in fund balance for 2018 and a balance e. Prepare the journal entries necessary to record the remainder of the budget and to reestablish the the project, they will be transferred to the Debt Service Fund. sheet as of December 31, 2018. budgetary accounts for encumbrances on January 1,2019. Assume that investment revenue expected to be earned in 2019 is $2,000,000