Question 1 Prepare journal entries to record the following transactions of a state, identifying the funds affected by each transaction. Record journal entries for all funds affected. The state prepares a budget for the Capital Projects Fund and uses encumbrance accounting in that fund 1. The state records its capital budget. It appropriates $10 million for highway construction, which will be financed entirely with the issuance of bonds. 2. The state sells 20-year 6% bonds having a face value of $10 million. The bonds are sold at a discount, so the state realizes a total of $9,900,000. Equal installments of principal will be paid every six months, together with interest on the unpaid balance. 3. The state awards two contracts, one for highway construction ($6,500,000) and one for construction supervision ($350,000). Both contracts provide for progress payments. The highway construction contract provides for 10% retainage pending completion of the project. There is no retainage on the construction supervision contract 4. The construction contractor submits an invoice for $1,500,000. The invoice is approved and a voucher is prepared, less the 10% retainage. 5. The construction supervisor submits an invoice for $100.000, and a voucher is prepared. 6. Both of the invoices in transactions 4. and 5. are paid. 7. The state transfers $800,000 from the General Fund to the Debt Service Fund in anticipation of the payment of debt service on the bonds. 8. The first semi-annual debt service on the 20-year bonds becomes due and payable (see transaction 2.) 9. The debt service in 8., above, is paid