Special Assessment Project

After discussions with property owners residing on Bruce and Garrison Streets, the city council of Hobson City, Alabama authorized installation of street lights to better protect area citizens. Suppose total cost of the project is $3,300,000. Hobson Citys general fund will contribute $300,000 and ten-year term bonds will be issued to fund construction of the project. Hobson City can issue bonds paying 3 percent annually at par. The principal and interest will be repaid in ten equal annual assessments paid by the affected property owners, calculated as a 10-year annuity whose present value is the bond principal. Because each annual assessment exceeds the interest due on the bonds, the excess is invested at 3 percent to retire the principal.

Required

Drop down options are as follows (Additions, Assessments receivable, Bond Proceeds, Cash, Deductions, Expenditures-interest, Investments, and Revenue from Assessments)

a. Calculate the amount of the total annual assessment needed to pay the annual interest for ten years and retire the bonds.

b. Assume the government is liable for the bonds. Prepare the fund journal entries and identify the funds affected when the bonds are issued, the assessments are levied, the first assessment is collected, and the first interest payment is made

c. Repeat b. assuming the government has no liability for the bonds, and assessments collected, invested, and disbursed for interest payments, are reported in a custodial fund.

Capital projects fund Description Debit Credit To record bond issuance. Debt service fund Description Debit Credit To record levy of special assessments. To record collection of current assessments. To record interest payment To record investment of excess assessment amount. Capital projects fund Description Debit Credit To record bond issuance. Custodial fund Description Debit Credit To record levy of special assessments. To record collection of current assessments. To record interest payment To record investment of excess assessment amount