Question

On May 1, City of Cerone approved $10000000 issue of 6% general obligation bonds maturing at 20yrs. Proceeds will be used to finance construction of a new civic center. Total cost estimated at $15000000, the remaining $5000000 are financed by state grant which was awarded. How do you write the journal entries for the below transactions for a capital fund project?

1. July 1 the general fund loaned $500000 to the civic center construction fund for engineering and other expenses

2. Preliminary planning cost $320000 were paid to Eminem Co. There had been no encombrance for this cost.

3. Dec. 1 the bonds were sold at 101, the premium was transfered to the debt service fund

4. March 15 a contract for $12000000 was entered into with Candu Construction Co. for major part of project.

5. Orders were placed for materials estimated at $55000.

6. April 1 a partial payment of $2500000 was received from the state.

7. The ordered materials were received at cost of $51000 and were paid.

8. June 15 a progress billing of $2000000 was received from Candu for work done. The city will withhold 6% billing until the project is complete.

9. The general fund was repaid $500000 previously loaned.

Answer 1

Journal entries to record the transaction  

Date	Particulars	Debit (in $)	Credit (in $)
July 1	Bank	500,000
	To General Fund		500,000
	( being general fund loan received)
	Planning cost	320,000
	To Bank		320,000
	(Being planning cost paid)
Dec 1	Bank	10,100,000
	To 6% Bobds issued		10,000,000
	To Debt service fund		100,000
	(Being bonds issued and premium transferred to Debt service fund)
March 15	Project liability	12,000,000
	To Reserve for project liability		12,000,000
	(Being liability to Condu construction recorded,)
	Project liability	55,000
	To Reserve for Project liability		55,000
	(Being material ordered)
April 6	Bank	2,500,000
	To Deffered Grant received		2,500,000
	(Being state grant received)
	Materials	51,000
	Reserve for Project liability	55,000
	To Accounts payable		51,000
	To Project liability		55,000
	(Being material received )
	Accounts Payable	51,000
	To Bank		51,000
	(Being liability for material paid)

Date	Particulars	Debit (in$)	credit (in$)
June 8	Candu construction co	2,000,000
	To contract payable		1,880,000
	To Contract payable- retained		120,000
	(Being contract billed and retained @6%)
	Reserve for Project liability	2000,000
	To Project liability		2,000,000
	(Being liability reserve reduced by amount billed)
	General Fund loan	500,000
	To Bank		500,000
	(Being amount repaid)