Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

In 2016 the governing body of the City of Wonder decided to construct a bridge expected to cost $3,000,000. The bridge construction and related costs

In 2016 the governing body of the City of Wonder decided to construct a bridge expected to cost $3,000,000. The bridge construction and related costs are to be financed as follows:

                                   Total      Percent

           Federal Grant   $1,200,000   40

           State Grant   600,000   20

           Bond issue proceeds   900,000   30

           Transfer from General Fund   300,000   10

               3,000,000   100

       The state grant is a fixed sum irrevocably granted for the bridge project and will revert to the state only if the bridge is not built. The federal grant is for 40% of the qualifying project expenditures, with a maximum grant limit of $1,200,000; and any excess grant cash will revert to the federal government.

  

       The bridge is to be constructed by a private contracting firm, Defliese & Co. The city's workforce will do related earthmoving and landscape work. The estimated costs of the bridge project are:

       Bridge Structure:

       Defliese & Co. contract   $ 2,400,000

       Earthmoving and Landscaping  

       Labor       $300,000

       Machine time   200,000

       Fuel and materials   100,000   600,000

               $ 3,000,000

       Defliese & Co. is to post a performance bond guaranteeing the quality and timeliness of its work. In addition, 5% of the amounts payable to Defliese & Co. under the contract will be retained as a further guarantee of the quality of its work. This retainage will be remitted upon final inspection of the bridge and its acceptance by the city.

       When the bridge capital project was officially authorized by ordinance, the City of Wonder controller recorded estimated revenues and appropriations in the amounts listed above.

       The following transactions occurred during 2016:

(1)       The contract with Defliese & Co. was signed and work began on the bridge.

(2)       Bonds were sold to help finance the project at a slight premium (101) for $909,000.

(3)       Fuel and materials ordered during the year totaled $55,000.

(4)       The state grant was received; but the governing body authorized only a $130,000 transfer from the general fund for now. The remainder will be authorized later.

(5)       Invoices were received and vouchered for fuel and materials, $49,000 (encumbered at $48,000); machine time, $81,000; and the Defliese & Co. contract, $1,000,000 (as encumbered).

(6)       Cash disbursements thus far were:

           Vouchers Payable   $970,000

           Investments   400,000

           Labor   140,000

(7)       Filed for federal grant reimbursement for 40% of the expenditures (transactions 5 & 6) incurred for the project thus far.

(8)       Accrued interest receivable on investments at year end was $18,000.

(9)       Invoices were received and vouchered for fuel and materials, $43,000 (partially encumbered at $7,000); machine time, $108,000; and the Defliese & Co. contract, $1,410,000 (encumbered at $1,400,000); including a $10,000 adjustment in the contract, approved by the governing body, for necessary work not anticipated.

(10)       Cash receipts during the remainder of the year were:

       Federal grant   $1,198,000

       Investments (including interest)   430,000

       Operating transfers from Gen. Fund   170,000

(11)       Cash disbursements made during the remainder of the year were:

       Vouchers payable   $1,600,500

       Payroll       129,000

(12)       Under the terms of the federal grant; (a) the $10,000 additional payment to Defliese & Co. is not an allowable cost; (b) only the actual costs for earthmoving and landscaping are allowable; and (c) the otherwise allowable costs must be reduced by the interest earned by investing project monies. Accordingly, $30,000 was recorded as payable to the federal government, pending final inspection of the completed bridge.

(13)       The new bridge was approved by the inspectors and accepted by the governing body which ordered that (a) the retained percentage be paid to the contractor, (b) the federal government be repaid (prior transaction), and (c) the remaining capital project fund balance be transferred to the related Debt Service Fund.

Required:

Prepare all entries, including closing entries, to record the Capital Projects Fund transactions and post to ledger accounts

Step by Step Solution

3.36 Rating (159 Votes )

There are 3 Steps involved in it

Step: 1

Sources of Funds 1 2 3 Federal Grant State Grant Bonds issued Trans... blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Introduction to Management Science

Authors: Bernard W. Taylor

11th Edition

132751917, 978-0132751919

More Books

Students also viewed these Accounting questions