Question

During fiscal year 2019, the voters of the City of Bingham approved the issuance of 3 percent tax-supported serial bonds in the face amount of $7,500,000 to construct and equip an annex to the City Hall. The bonds are to mature in blocks of $312,500 every six months over a 12-year period commencing January 1, 2021.

Required

1. Prepare general journal entries as necessary to record the following transactions in the general journals of the City Hall Annex Construction Fund and, if applicable, in the governmental activities general journal at the government-wide level. Do not record entries at this time in any other affected funds; those entries will be made in later chapters of this cumulative problem that cover those funds. Use account titles listed under the drop-down [Account] menu. Be sure the year 2020 is selected from the dropdown [Year] menu and the appropriate paragraph number shown in bold-face font below is in the [Description] field.

1. [Para. 5a-1] On the first day of the 2020 fiscal year (January 1, 2020), the bond issue was sold at 101. Cash in the face amount of the bonds, $7,500,000, was deposited in the City Hall Annex Construction Fund; the premium was deposited in the debt service fund, as required by state law.  

Required: Record these transactions in the City Hall Annex Construction Fund and governmental activities journals. (Hint: In addition to recording the liability for 3% serial bonds payable in the governmental activities journal, you should record the premium on the bonds payable [credit Premium on Serial Bonds Payable] in the governmental activities general journal.) Wait until instructed in Chapter 6 to make the corresponding entry in the debt service fund.

2. [Para. 5a-2] The city invested $5,000,000 of the bond proceeds in 90-day notes.

Required: Record this transaction in both the City Hall Annex Construction Fund and governmental activities general journals.

3. [Para. 5a-3] The City Hall Annex Construction Fund purchased land for the annex for $450,000. This amount was vouchered.

Required: Record this transaction in both the City Hall Annex Construction Fund and governmental activities general journals. In the governmental activities general journal at the government-wide level, this purchase should be debited to Land. (Note: This transaction was not encumbered.)

4. [Para. 5a-4] A contract for architectural services was signed at an estimated amount of $350,000 for the design of the City Hall Annex.

Required: Record the encumbrance in the City Hall Annex Construction. This transaction has no effect at the government-wide level.

5. [Para. 5a-5] Legal and other capitalizable costs of the bond issue were vouchered in the amount of $165,000.

Required: Record this transaction in both the City Hall Annex Construction Fund and governmental activities general journals. (Note: This transaction was not encumbered.)

6. [Para. 5a-6] Preliminary plans were received (related to the contract signed in paragraph 5a-4) for which architectural fees of $103,000 were vouchered.

Required: Eliminate the encumbrance and record a Vouchers Payable liability in the City Hall Annex Construction Fund and governmental activities journals, as appropriate.

7. [Para. 5a-7] Construction bids were opened and analyzed. A contract was signed with the firm that submitted the winning bid of $6,000,000. A provision of the contract permits the city to withhold 5 percent of payment pending final acceptance of the completed project.

Required: Record the signing of the contract in the City Hall Annex Construction Fund general journal. This transaction has no effect at the government-wide level.

8. [Para. 5a-8] Vouchers payable were recorded in the amount of $240,000 for the final architectural plans and specifications for the construction project (see para. 5a-4).

Required: Eliminate the remaining encumbrance for the architectural services and record a Vouchers Payable liability in the City Hall Annex Construction Fund and governmental activities journals, as appropriate.

9. [Para. 5a-9] The 90-day notes matured, paying $37,500 in interest (see para. 5a-2).

Required: Record this transaction in both the City Hall Annex Construction Fund and governmental activities general journals. The interest should be recorded as general revenue in the governmental activities journal.

10. [Para. 5a-10] The contractor submitted a billing for $3,000,000. This amount was recorded as a contract payable.

Answer 1