Question

Journal entries, financial statements, and closing entries for a Capital Projects Fund The following transactions occurred during the fiscal year July 1, 2018 to June 30, 2019: 1. The City of Spainville approved the construction of a city hall complex for a total cost of $120,000,000. A few days later, a contract with a 5 percent retainage clause was signed with Paltrow Construction for the complex. The buildings will be financed by a federal expenditure driven grant of $25,000,000 and a general obligation bond issue of $100,000,000. During the current year, investment revenue of $4,000,000 is budgeted. (Assume the budget is recorded in the accounts and encumbrance accounting is used.) 2. The bonds were issued for $90,000,000 (the face amount of the bonds was $100,000,000). The difference between the actual cost of the project and the bond and grant proceeds was expected to be generated by investing the excess cash during the construction period. 3. The city collected the grant from the government. 4. The city invested 590,000,000, 5. The contract signed with Paltrow stipulated that the contract price included architect fees. The architects were paid their fee of $45.000 by Spainville (Assume a Vouchers payable account is used)

Answer 1

(a)

1.   

2.         Cash   90,000,000

             Other financing use--bond issue discount                               10,000,000

                   Other financing source--long term debt issued                                          100,000,000

3.         Cash   25,000,000

                   Advance received on grant     25,000,000

4.         Investments   90,000,000

                   Cash   90,000,000

5.

6.

7.         Cash 5,020,000

                   Investments 5,000,000

Revenues—investments   20,000

8.         Cash   3,500,000

Revenues—investments 3,500,000

9. Construction contracts payable   23,750,000

Cash 23,750,000

10.   Budgetary fund balance reserved for encumbrances 25,000,000

Encumbrances—capital project 25,000,000

             Expenditures—construction costs 25,000,000

Construction contracts payable 23,750,000

Retainage payable 1,250,000

11.        Cash 16,000,000

                   Investments     14,600,000

                   Revenues—investments 1,400,000

12.        Construction contracts payable                                               23,750,000

                   Cash   23,750,000

13.        Investment income receivable                                                      250,000

                   Revenues—investments   250,000

14.        None (entries made in Debt Service Fund)

(b)

(c)

(d)

(e)

             Encumbrances—capital project                                               69,955,000

                   Budgetary fund balance reserved for encumbrances                                   69,955,000

             Estimated revenues   2,000,000

             Budgetary fund balance 67,955,000

                   Appropriations   69,955,000