Please explain each step.

During 2018 Luling Township engaged in the following transactions related to modernizing the bridge over the Luling River. The township accounts for longterm construction projects in a capital projects fund. On July 1 it issued 10year, 4 percent bonds with a face value of $1 million. The bonds were sold for $1,016,510, an amount that provides an annual yield of 3.8 percent (semiannual rate of 1.9 percent). The city incurred $10,000 in issue costs. On August 1 it was awarded a state reimbursement grant of $800,000. During the year it incurred allowable costs of $600,000. Of these it paid $500,000 in cash to various contractors. It received 268 CHAPTER 6 Accounting for Capital Projects and Debt Service $450,000 from the state, expecting to receive, early in 2019, the $150,000 difference between allowable costs incurred and cash received. Moreover, it expects to receive the balance of the grant later in 2019. It invested the bond proceeds in shortterm federal securities. During the year it received $8,000 in interest, and at yearend the market value of the securities was $1,000 more than the township had paid for them. It transferred the bond premium (net of issue costs) to an appropriate fund. It transferred $20,000 from the general fund to an appropriate fund to cover the first payment of bond interest which was due, and paid, on December 31. On January 1, the township defeased in substance $400,000 of bonds that had been issued years earlier to construct the bridge. The bonds had been issued at par. To effect the transaction the township issued $405,000 of new bonds, at par, and placed the proceeds in a trust. The old bonds have a coupon rate of 5 percent; the new bonds have a coupon rate of 4 percent. What amount should Luling report in its December 31, 2018, financial statements as: Total expenditures in its capital projects fund