Problem 6-2

The transaction of a capital projects fund can be derived from its basic financial statements.

Crystal City established a capital projects find to account for the construction of a new bridge. During the year the fund was established, the city issued bonds, signed (and encumbered) $6 million in contacts with various suppliers and contractors, and incurred $4.3 millions of construction costs. It temporarily invested a portion of the bond proceeds and earned $20,000 in interest, which was received in cash. The accompanying statement of revenues, expenditures, and change in fund balance and balance sheet were taken from its year-end financial report. Based on the data in the two statements, as well as those provided on the previous paragraph, prepare journal entries to summarize the transaction in which the fund engaged. You should prepare budgetary entries, but need not to prepare closing entries.

Crystal City, capital Project Fund Statement of Revenue, Expenditures, and Changes in Fund Balance- Actual and Budget Year Ended December 31 (in thousands)

	Actual	Budget
Revenues
Cash grant from state	$ 2,000	$ 2,000
Interest	20	20
Total Revenues	$ 2,020	$ 2,020
Expenditures
Bond issue costs	$ 50
Construction costs	4,300	5,000
Total expenditures	$ 4,350	$ 5,000
Excess of revenues over expenditures	$ (2,330)	$ (3,000)
Other financing sources (uses)
Proceeds bonds	$ 10,000	$ 10,000
Proceeds bonds (premium)	200
Nonreciprocal cash transfer of bond premium (less issue costs) to debt service fund	(150)
Increase in reserve for encumbrances	(1,700)
Total other financing sources (uses)	$ 8,350	$ 10,000
Excess of revenues and net financing sources over expenditures	$ 6,020	$ 7,000
Fund balance, beginning of year	0	0
Fund balance, end of year	$6,020	$7,000
Crystal City, Capital Projects Fund Balance Sheet as of December 31 (in thousands)
Assets
Cash	$5,320
Investments	5,000
Total assets	$10,320
Liabilities
Accounts payable (to contractors)	$ 2,600
Fund balance
Committed	$ 1,700
Assigned	6,020
Total fund balance	$ 7,720
Total liabilities and fund balance	$ 10,320