Question

The City of Waterman established a capital projects fund for the construction of an access ramp from the parking garage to the city’s office building to be used by individuals with disabilities. The estimated cost of the ramp is $200,000. On January 1, 20X2, a 10 percent, $150,000 bond issue was sold at 104.0 with the premium transferred to the debt service fund. At that date, the county board provided a $50,000 grant. After a period of negotiation, the city council awarded a construction contract for $182,000 on April 5, 20X2. The ramp was completed on August 8, 20X2; its actual cost was $189,000. The city council approved payment of the total actual cost of $189,000. In addition to the $189,000, the ramp was carpeted with all-weather material at a cost of $5,500. On November 3, 20X2, the city council gave the final approval to pay for the ramp and the carpeting. After all bills were paid, the remaining fund balance was transferred to the debt service fund. The City of Waterman established a debt service fund to account for the financial resources used to service the bonds issued to finance the ramp is $200,000. The 10 percent, $150,000 bond issue was sold at 104.0 on January 1, 20X2. It is a 10-year serial bond issue. The resources to pay the interest and annual principal will be from a property tax levy. Additional Information: 1. The operating budget for 20X2 included estimated revenue of $35,000. Budgeted appropriations included $15,000 for principal, $15,000 for interest, and $4,000 for other items. The budget also included an estimated transfer in of $5,000 from the capital projects fund. 2. The property tax levy was for $40,000 and an allowance for uncollectibles of $4,000 was established. Collections totaled $35,000. The remaining taxes were reclassified as delinquent and the allowance was reduced to $1,000. The bond premium was received from the capital projects fund. 3. The current portion of the serial bonds and the interest due this year were recorded and paid. Other expenses charged to the debt service fund totaled $1,700, of which $1,200 was paid. 4. The nominal accounts were closed. Required: a. Prepare entries for the debt service fund for 20X2. b. Prepare a balance sheet for the debt service fund as of December 31, 20X2. c. Prepare a statement of revenues, expenditures, and changes in fund balance for the debt service fund for 20X2.

Answer 1

	Particulars	Debit	credit
1	Record Budget
	Estimated Revenue Control A/c	35000
	Transfer in a/c	4000
	To Appropriation Control		34000
	To Budgetary Fund Balance		5000
2	Record levy Tax
	Property Taxes Receivable A/c	40000
	To Allowance For Uncollectible		4000
	To revenue Property tax		36000
	Record tax collection
	Cash A/c	35000
	To property Taxes Receivable		35000
	Revised Estimates of uncollectible
	Property taxes Receivable A/c	5000
	Allowance For Uncollectible	4000
	To property Taxes Receivable		5000
	To Allowance for uncollectible- delinquent		1000
	To Revenue property tax		3000
	Received bond premium
	Cash A/c	6000
	To Transfer in		6000
	(150000/100*104)-150000
3	Expenditure A/c	30000
	To matured bonds payable		15000
	To matured interest payable		15000
	Matured bonds payable a/c	15000
	matured interest payable	15000
	To cash		30000
	Pay Matured principal and interest
	Expenditure A/c	1700
	To Vouchers Payable		1700
	Record other expenditure
	Voucher payable	1200
	To cash		1200
	Pay approved voucher
4	Cash A/c	5500
	To Transfer in Capital projects funds		5500
	Record transfer of unspent funds in capital projects
	Fund to debt service fund
	(200000-189000-5500)
5	Appropriations Control A/c	34000
	Budgetary fund balance	5000
	To estimated revenue Control A/c		35000
	To Transfer A/c		4000
	Close budgetary Account
	Revenue Property Tax A/c	39000
	Other Financing sources- Transfer in A/c	11000
	To fund balance reserved for debt service		18300
	To expenditures		31700
	Close nominal Accounts
	B. Balance sheet
	December 31, 20x2
	Assets
	Cash	15300
	Property taxes Receivable	3500
	Total Assets	18800
	Liabilities
	voucher payable	500
	Fund Balance
	Reserved for debt service	18300
	Total Liabilities And fund balance	18800
	C. Statement of revenue, Expenditure
	And changes in fund balance
	Revenue
	Property Taxes		39000
	Expenditures:
	Principal Retirement	15000
	Interest	15000
	Miscellaneous	1700
			31700
	Difference		7300
	Other financing Sources
	Transfer in capital project fund		11000
	Net change in fund balance		18300
	Fund balance		0
	Fund balance Closing		18300