Planned Costs and Financing for Golf Course

The City plans to sell the bonds on February $1,2021.$ Because the bonds are a term

issue, bond principal matures in full on February $1,2031.$ Interest is payable each

August $1$ and February $1,$ beginning August $1,2021.$ 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 $15,2021,$ 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 contractor's work and approve progress

payments.

Accounting for the GEF will be done by the city's 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 $2021.$

The following events and transactions occurred during the year ended December $31,2021$:

January $3,2021$: Whitt Falls formally established the GEF; the fund's first transaction

was the receipt, in cash, of the capital contribution from the General Fund.

January $24$: The city acquired the adjacent parcel of land from the private owner

for the planned $$500,000.$

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

February $15$: Development of the golf course itself and construction of the clubhouse

commenced.

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$").$

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

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

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.

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

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.

June $1$: The City acquired golf course maintenance equipment by entering into a $4-$year

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.

June $2$: Inventory in the amount of $$12,000$ was acquired for the pro shop; the

purchase created an accounts payable.

June $4$: The course opened for business. Greens fees $($charges for services$)$

aggregated $$209,000$ for June. Pro shop sales amounted to

$$5,000.$ All revenues were collected.

June $30$: Expenses for June were as follows. $($Charge all expenses to "Operating

expenses$-$cost of sales."$)$

Maintenance and pro shop labor $($paid in cash$)-$ $$48,000$

Maintenance supplies, from the Parks Department$$Special Revenue Fund $-$ $$4,000$

$($The invoice was received, but not paid.$)$

Water, supplied by the Whitt Falls water utility$-$an Enterprise Fund $-$ $$80,000$

$($The invoice was received, but not paid.$)$

Cost of merchandise sold by the pro shop $-$ $$2,200$

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

December $31$: Greens fee revenues for the second half of $2021$ totaled $$370,000$;

pro shop sales for the same period were