PLEASE HELP WITH CHAPTER 6 PART D ENTRIES THANK YOU (from part a) The City of Smithville created a Street Improvement Bond Debt Service Fund to be used to retire the bonds issued for the purposes described in Chapter 5 of this cumulative problem, and to pay the interest on the bonds The $3,000,000 face value of bonds issued during 2023 are dated January 1, 2023, but were not issued until February 1, 2023 Because bondholders will receive six months of interest on July 1, 2023 in the total amount of $37,500, they were required to pay $6,250 on the date of issue to pay the city for unearned interest from January 1 to February 1 The bonds bear interest of 2 5 percent per annum The first interest payment of $37,500 is due July 1, 2023 Subsequent semiannual interest payments will be made January 1 and July 1 of each following year until the maturity of the bonds Bonds in the amount of $750,000 are to mature five years after the date of the bonds (January 1, 2028), and $150,000 is to mature January 1 of each year thereafter until all the bonds issued in 2023 have been retired Thus, these bonds are deferred serial bonds as discussed in Chapter 6 of the textbook Make entries as instructed in the following paragraphs Bond covenants related to this bond issue require the city to levy property taxes sufficient to make principal and interest payments until the bonds have been retired The city council has approved a resolution to enable the property tax levy, beginning in fiscal year 2024 As the bond issue did not occur until February 2023, the city will not levy debt service property taxes until next year PART D Fiscal year 2024 Transactions d On January 2, 2024, the City of Smithville approved the issuance of additional street improvement bonds in the total amount of $6,000,000 The new bonds will be serial bonds and will bear interest at the nominal annual rate of 2 75 percent These bonds are dated January 1, 2024, and will be issued during the next few months when the citys bond underwriters believe market conditions are most favorable The first interest payment on the new bonds will be due on July 1, 2024 interest will be payable January 1 and July 1 of each following year until maturity Bonds in the amount of $200,000 will mature on January 1, 2025, and in the same amount at each interest payment date thereafter until all bonds of the 2024 issue have been retired To give you some additional practice on accounting for a debt service fund record the following events and transactions that are presumed to occur in fiscal year 2024 The transactions are to be recorded in the Street Improvement Bond Debt Service Fund only You should ignore entries that would be required in the General Fund and in the governmental activities general journal related to these transactions for fiscal year 2024 Keep in mind that these transactions will not affect the 2023 financial statements that will be prepared in Chapter 9 Be sure to select 2024 in the Year menu Para 6 d 1 On January 2, 2024 , the Street Improvement Bond Debt Service Fund budget for 2024 is legally adopted The budget should provide for estimated property tax revenue of $645,000, of which $300,000 will be invested to accumulate resources over the next four years for the $750,000 principal payment that will be due on January 1, 2028 for the 2 5 deferred serial bonds The budget should include estimated investment earnings of $4,000 during 2024 Property tax revenues are intended to help pay $75,000 interest due during 2024 on the 2 5 deferred serial bonds (due January 1 and July 1), as well as the $82,500 interest payment that will be due on the 2 75 serial bonds on July 1, 2024 The property tax levy will also provide resources to help pay interest of $120,000 due on January 1, 2025 ($37,500 interest on the 2 5 deferred serial bonds and $82,500 on the 2 75 serial bonds) No premium or accrued interest on bonds sold is included in the 2024 estimated other financing sources or estimated revenues If the Street Improvement Debt Service Fund does receive such items the budget will be amended accordingly to reflect such items Required Record the budget for FY 2024 in the general journals for the Street Improvement Bond Debt Service Fund As a reminder, you should make journal entries for FY 2024 only in the debt service fund, ignoring any entries for governmental activities at the government wide level or any other funds Para 6 d 2 Property taxes were levied in the amount of $650,000, of which $5,000 was estimated to be uncollectible Required Prepare the journal entry to record the taxes levied and related estimated uncollectible Para 6 d 3 Bond interest due on January 1, 2024 in the amount of $37,500 was paid for the 2 5 deferred serial bonds Required Prepare the journal entry to record the payment of interest Para 6 d 4 On March 1, 2024, the Street Improvement Debt Service Fund received $27,500 for two months of accrued interest from the sale of the additional $6,000,000 street improvement bonds (see first paragraph of section d ) Required Prepare journal entries to record the receipt of $27,500 in cash Also, prepare a journal entry to amend the FY 2024 budget to reflect the amount of the accrued interest on bonds sold You should credit Budgetary Fund Balance for the full $27,500, since the appropriation for the interest payment due on July 1, 2024, was recorded in Paragraph 6 d 1 Para 6 d 5 By June 30, 2024, property taxes had been collected in the amount of $475,000 $300,000 was invested in temporary investments that earn 2 6 percent per annum Required Prepare the journal entry to record the amount invested Para 6 d 6 Bond interest of $37,500 due July 1, 2024 on the deferred serial bonds issued in 2023 and $82,500 on the 2 75 serial bonds issued in 2024 was paid on July 1 Required Prepare the journal entry to record the payment of interest Para 6 d 7 During the second half of 2024, property taxes were collected in the amount of $150,000 Required Prepare the journal entry to record the receipt of current property taxes Para 6 d 8 At year end, the uncollected amount of current property taxes receivable and related estimated uncollectible amount were reclassified as delinquent Interest and penalties of $875 were also levied, of which $131 was estimated as uncollectible and $684 was classified as a deferred inflow of resources, the remainder was recognized as revenue Required Prepare the journal entries to reclassify amounts as indicated to accrue interest and penalties, and related revenues and deferred inflow of resources Para 6 d 9 Of the amount of current property taxes classified as delinquent in 6 d 8, it was determined based on history that $7,440 would not be collected within 60 days of the fiscal year end Required Reclassify the revenues as deferred inflows of resources Para 6 d 10 Investment earnings received in cash during the year amounted to $3,900 Required Prepare the journal entry to record the investment earnings received After verifying the accuracy of the preceding entries, post the amounts to the general ledger accounts by clicking Post entries Prepare closing entries for the Street Improvement Bond Debt Service Fund as of December 31, 2024 For each account closed, be sure and click on the check mark for Closing Entry and that Closing Entry appears in the Add description box Post the closing entries to the general ledger by clicking Post entries

The Answer is in the image, click to view ...

Answered step by step

Verified Expert Solution

Link Copied!

Question

1 Approved Answer

Posted on Sep 28, 2024

PLEASE HELP WITH CHAPTER 6 - PART D ENTRIES. THANK YOU. (from part a) The City of Smithville created a Street Improvement Bond Debt Service

PLEASE HELP WITH CHAPTER 6 - PART D ENTRIES. THANK YOU.

(from part a)

The City of Smithville created a Street Improvement Bond Debt Service Fund to be used to retire the bonds issued for the purposes described in Chapter 5 of this cumulative problem, and to pay the interest on the bonds. The $3,000,000 face value of bonds issued during 2023 are dated January 1, 2023, but were not issued until February 1, 2023. Because bondholders will receive six months of interest on July 1, 2023 in the total amount of $37,500, they were required to pay $6,250 on the date of issue to pay the city for unearned interest from January 1 to February 1. The bonds bear interest of 2.5 percent per annum. The first interest payment of $37,500 is due July 1, 2023. Subsequent semiannual interest payments will be made January 1 and July 1 of each following year until the maturity of the bonds. Bonds in the amount of $750,000 are to mature five years after the date of the bonds (January 1, 2028), and $150,000 is to mature January 1 of each year thereafter until all the bonds issued in 2023 have been retired. Thus, these bonds are deferred serial bonds as discussed in Chapter 6 of the textbook. Make entries as instructed in the following paragraphs.

Bond covenants related to this bond issue require the city to levy property taxes sufficient to make principal and interest payments until the bonds have been retired. The city council has approved a resolution to enable the property tax levy, beginning in fiscal year 2024. As the bond issue did not occur until February 2023, the city will not levy debt service property taxes until next year.

PART D

Fiscal year 2024 Transactions:

d. On January 2, 2024, the City of Smithville approved the issuance of additional street improvement bonds in the total amount of $6,000,000. The new bonds will be serial bonds and will bear interest at the nominal annual rate of 2.75 percent. These bonds are dated January 1, 2024, and will be issued during the next few months when the citys bond underwriters believe market conditions are most favorable.

The first interest payment on the new bonds will be due on July 1, 2024; interest will be payable January 1 and July 1 of each following year until maturity. Bonds in the amount of $200,000 will mature on January 1, 2025, and in the same amount at each interest payment date thereafter until all bonds of the 2024 issue have been retired. To give you some additional practice on accounting for a debt service fund record the following events and transactions that are presumed to occur in fiscal year 2024. The transactions are to be recorded in the Street Improvement Bond Debt Service Fund only.

You should ignore entries that would be required in the General Fund and in the governmental activities general journal related to these transactions for fiscal year 2024. Keep in mind that these transactions will not affect the 2023 financial statements that will be prepared in Chapter 9. Be sure to select 2024 in the [Year] menu.

[Para. 6-d-1] On January 2, 2024, the Street Improvement Bond Debt Service Fund budget for 2024 is legally adopted. The budget should provide for estimated property tax revenue of $645,000, of which $300,000 will be invested to accumulate resources over the next four years for the $750,000 principal payment that will be due on January 1, 2028 for the 2.5% deferred serial bonds. The budget should include estimated investment earnings of $4,000 during 2024. Property tax revenues are intended to help pay $75,000 interest due during 2024 on the 2.5% deferred serial bonds (due January 1 and July 1), as well as the $82,500 interest payment that will be due on the 2.75% serial bonds on July 1, 2024. The property tax levy will also provide resources to help pay interest of $120,000 due on January 1, 2025 ($37,500 interest on the 2.5% deferred serial bonds and $82,500 on the 2.75% serial bonds). No premium or accrued interest on bonds sold is included in the 2024 estimated other financing sources or estimated revenues. If the Street Improvement Debt Service Fund does receive such items the budget will be amended accordingly to reflect such items.

Required: Record the budget for FY 2024 in the general journals for the Street Improvement Bond Debt Service Fund. [As a reminder, you should make journal entries for FY 2024 only in the debt service fund, ignoring any entries for governmental activities at the government-wide level or any other funds.]

[Para. 6-d-2] Property taxes were levied in the amount of $650,000, of which $5,000 was estimated to be uncollectible.

Required: Prepare the journal entry to record the taxes levied and related estimated uncollectible.

[Para. 6-d-3] Bond interest due on January 1, 2024 in the amount of $37,500 was paid for the 2.5% deferred serial bonds.

Required: Prepare the journal entry to record the payment of interest.

[Para. 6-d-4] On March 1, 2024, the Street Improvement Debt Service Fund received $27,500 for two months of accrued interest from the sale of the additional $6,000,000 street improvement bonds (see first paragraph of section d).

Required: Prepare journal entries to record the receipt of $27,500 in cash. Also, prepare a journal entry to amend the FY 2024 budget to reflect the amount of the accrued interest on bonds sold. You should credit Budgetary Fund Balance for the full $27,500, since the appropriation for the interest payment due on July 1, 2024, was recorded in Paragraph 6-d-1.

[Para. 6-d-5] By June 30, 2024, property taxes had been collected in the amount of $475,000; $300,000 was invested in temporary investments that earn 2.6 percent per annum.

Required: Prepare the journal entry to record the amount invested.

[Para. 6-d-6] Bond interest of $37,500 due July 1, 2024 on the deferred serial bonds issued in 2023 and $82,500 on the 2.75% serial bonds issued in 2024 was paid on July 1.

Required: Prepare the journal entry to record the payment of interest.

[Para. 6-d-7] During the second half of 2024, property taxes were collected in the amount of $150,000.

Required: Prepare the journal entry to record the receipt of current property taxes.

[Para. 6-d-8] At year-end, the uncollected amount of current property taxes receivable and related estimated uncollectible amount were reclassified as delinquent.

Interest and penalties of $875 were also levied, of which $131 was estimated as uncollectible and $684 was classified as a deferred inflow of resources, the remainder was recognized as revenue.

Required: Prepare the journal entries to reclassify amounts as indicated; to accrue interest and penalties, and related revenues and deferred inflow of resources.

[Para. 6-d-9] Of the amount of current property taxes classified as delinquent in 6-d-8, it was determined based on history that $7,440 would not be collected within 60 days of the fiscal year end.

Required: Reclassify the revenues as deferred inflows of resources.

[Para. 6-d-10] Investment earnings received in cash during the year amounted to $3,900.

Required: Prepare the journal entry to record the investment earnings received.

After verifying the accuracy of the preceding entries, post the amounts to the general ledger accounts by clicking [Post entries]. Prepare closing entries for the Street Improvement Bond Debt Service Fund as of December 31, 2024. For each account closed, be sure and click on the check mark for [Closing Entry] and that Closing Entry appears in the [Add description] box. Post the closing entries to the general ledger by clicking [Post entries].