Question

P7-2 (General Ledger Entries; Statements) The following transactions took place in the town of Burchette during 20X3: 1. A bond issue of $12,000,000 was authorized for the construction of a library, and the estimated bond issue proceeds and related appropriations were recorded in the General Ledger accounts of a new Capital Projects Fund. 2. The bonds were sold at a premium of $90,000. 3. The cost of issuing the bonds, $80,000, was paid. 4. An order was placed for materials estimated to cost $6,500,000. 5. Salaries and wages of $500,000 were paid. 6. The premium, net of bond issuance costs, was transferred to a Debt Service Fund. The following transactions took place during 20X4: 7. The materials were received; the actual cost was $6,585,000. 8. Salaries and wages of $4,010,000 were paid. 9. All outstanding bills were paid. 10. The project was completed. The accounts were closed, and the remaining balance was transferred to a Debt Service Fund. Required a.Prepare all journal entries (budgetary and actual), including closing entries, to record the Capital Projects Fund transactions for 20X3 and 20X4. b.Prepare a Capital Projects Fund balance sheet as of December 31, 20X3. c.Prepare a Capital Projects Fund Statement of Revenues, Expenditures, and Changes in Fund Balance for the project, including (1) the year ended December 31, 20X3, and (2) a separate budgetary combined comparison statement for the years ended December 31, 20X3 and 20X4. I don't understand what the closing entries should be.

Answer 1

A:

Village of Burchette
Capital Projects Fund
General Journal
20X3
1	Estimated Bond Issue Proceeds			12,000,000
		Appropriations			12,000,000
	(To record estimated bond issue proceeds and appropriations)
2	Cash			12,090,000
		Other Financing Sources - Bonds			12,000,000
		Other Financing Sources - Bond Premium			90,000
	(To record the sale of bonds at a premium)
3	Expenditures - Bond Issue Costs			80,000
		Cash			80,000
	(To record the bond issue expenses)
4	Encumbrances - Materials			6,500,000
		Encumbrances Outstanding			6,500,000
	(To record encumbrances for materials on order)
5	Expenditures - Salaries & Wages			500,000
		Cash			500,000
	(To record salaries and wages paid)
6	Other Financing Uses - Transfer to Debt Service Fund			10,000
		Debt Service Fund			10,000
	(To record transfer of bond premium, net issue costs, to Debt Service Fund)
C1	Other Financing Sources - Bonds			12,000,000
	Other Financing Sources - Bond Premium			90,000
		Unreserved Fund Balance			90,000
		Estimated Bond Issue Proceeds			12,000,000
	(To close bond issue proceeds account)
C2	Appropriations			500,000
	Fund Balance			90,000
		Other Financing Uses - Transfer to Debt Service Fund			10,000
		Expenditures			580,000
	(To close expenditures and operating transfer accounts at year end)
C3	Appropriations			6,500,000
		Encumbrances - Materials			6,500,000
	(To close encumbrances at year end)
	Appropriations			5,000,000
		Fund Balance			5,000,000
	(To close the budgetary account for appropriations)
	Fund Balance			5,000,000
		Appropriated, Unencumbered Fund Balance			5,000,000
	(To reduce fund balance for amounts required to cover outstanding appropriations)
Village of Burchette
Capital Projects Fund
General Journal
20X4
20X4 Reversing Entry
	Encumbrances			6,500,000
		Appropriations			6,500,000
	(To reverse encumbrances closing entry made at the end of 20X3)
7	Encumbrances Outstanding			6,500,000
	Expenditures - Materials			6,585,000
		Encumbrance			6,500,000
		Voucher Payable			6,585,000
	(To reverse entry setting up encumbrances and to record expenditure for materials)
8	Expenditures - Salaries & Wages			4,010,000
		Cash			4,010,000
	(To record salaries and wages paid)
9	Voucher Payable			6,585,000
		Cash			6,585,000
	(To record payment of outstanding bills)
10	Other Financing Uses - Transfer to Debt Service Fund			905,000
		Debt Service Fund			905,000
	(To transfer balance to Debt Service Fund)
C1	Appropriations			11,500,000
		Expenditures			10,595,000
		Fund Balance			905,000
	(To close expenditures)
C2	Fund Balance			905,000
		Other Financing Uses - Transfer to Debt Service Fund			905,000
	(To close transfer account and terminate Capital Projects Fund)

B:

Village of Burchette
Capital Projects Fund
Balance Sheet
December 31, 20X3
Assets
	Cash			11,590,000
Fund Balance
	Fund Balance, Restricted			11,590,000

C1:

Village of Burchette
Capital Projects Fund
Statement of Revenues, Expenditures, and Changes in Fund Balance
For the Year Ended December 31, 20X3
(Project Incomplete)
Revenues				$                       -	-
Expenditures
	Salaries & Wages			$            500,000
	Bond Issue Costs			80,000	580,000
Excess of Revenues Over (Under) Expenditures					(580,000)
Other Financing Sources (Uses)
	Bonds Issue (Face amount)			12,000,000
	Bond Premium			90,000	12,090,000
Net Change in Fund Balance					11,510,000
	Fund Balance - Beginning of 20X3				-
	Fund Balance - End of 20X3				$      11,510,000

C2:

Village of Burchette
Capital Projects Fund
Statement of Revenues, Expenditures, and Changes in Fund Balance
Budget and Actual - For the Project
Years Ended December 31, 20X3 and 20X4
			20X4	20X3	Actual Total	Budget	Variance - Favorable (Unfavorable)
Revenues:
			-	-	-	-	-
Other Financing Sources:
	Bond Issue (Face amount)		-	12,000,000	12,000,000	12,000,000	-
	Bond Premium		-	90,000	90,000	-	90,000
			-	12,090,000	12,090,000	12,000,000	90,000
Expenditures
	Materials		6,585,000		6,585,000	6,500,000	(85,000)
	Salaries & Wages		4,010,000	500,000	4,510,000	5,500,000	990,000
	Bond Issue Cost			80,000	80,000		(80,000)
			10,595,000	580,000	11,175,000	12,000,000	825,000
Excess of Revenues and Other Financing Sources
	Over (Under) Expenditures				915,000	-	915,000
Other Financing Uses:
	Transfer to Debt Service Fund		905,000	10,000	915,000	-	(915,000)
Net Changes in Fund Balance			(11,500,000)	11,500,000	-	-	-
	Fund Balance - Beginning of Year		11,500,000	-	-	-	-
	Fund Balance - End of Year		-	11,500,000	-	-	-