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The following transactions relate to the construction of a building by the Village of Navajo Falls. The Village adopts a formal budget and uses encumbrance
The following transactions relate to the construction of a building by the Village of Navajo Falls. | |||||||
The Village adopts a formal budget and uses encumbrance accounting. | |||||||
Prepare journal entries to record the following transactions in the Capital Projects Fund. | |||||||
1. The Village Council adopts a capital budget at the beginning of the year. To finance construction | |||||||
of the building, the Village will transfer $3 million from its General Fund and apply for a state grant | |||||||
of $1 million. It appropriates $4 million for construction. | |||||||
2. The General Fund transfers $3 million to the Capital Projects Fund for the new project. | |||||||
3. Navajo Falls awards a construction contract in the amount of $3.4 million. | |||||||
4. The contractor sends a progress billing to Navajo Falls in the amount of $1.6 million. The bill is | |||||||
approved by the Village's engineers and a voucher is prepared, less a 10% retainage pending | |||||||
completion of the building and final approval by the Village. | |||||||
5. The contractor encounters construction problems due to unforeseen soil conditions. As a result, | |||||||
Navajo Falls authorizes the cost increase of the construction contract by $200,000. | |||||||
6. The voucher in 4, above, is paid. | |||||||
7. Navajo Falls received $800,000 grant from the state for the building construction. | |||||||
8. The contractor completes construction, and sends Navajo Falls an invoice for the remaining $2 million. | |||||||
The Village's engineers inspect the building and accept the work. The invoice is approved and paid, | |||||||
together with the amount retained on the progress billing in 4, above. | |||||||
JE | Journal Entries | Dollar Amounts | |||||
Number | Account Names (be sure to indent your credit accounts) | Debit | Credit |
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