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The voters of the City of Monroe approved the issuance of
tax-supported bonds in the face amount of $4,000,000 for the
construction and equipping of a new City Jail. Architects were to
be retained, and construction was to be completed by outside
contractors. In addition to the bond proceeds, a $1,335,000 grant
was expected from the state government.
Required:
a. Record the following transactions in the general
journal and post to the general ledger. Control accounts are not
necessary.
b. Post the entries to the City Jail Construction Fund
general ledger.
c. Prepare and post an entry closing all nominal accounts
to Fund Balance.
5–C. Part 2. Existing Debt Service Fund
Transactions
The City Hall Debt Service Fund of the City of Monroe has been open
for five years; it was created to service a $16,000,000, 3 percent
tax-supported bond issue. As of December 31, 2019, this serial bond
issue had a balance of $12,000,000. Semiannual interest payments
are made on January 1 and July 1, and a principal payment of
$400,000 is due on January 1 and July 1 of each year.
As this is a regular serial bond debt service fund, the only
accounts with balances as of January 1, 2020, were Cash with Fiscal
Agent and Fund Balance—Restricted for Debt Service, each with
balances of $412,000. (Revenues were raised and collected in cash
in 2019 in order to be able to pay bond principal and interest due
on January 1, 2020.) The government chose not to accrue interest
payable.
Required:
a. Prepare journal entries for the following transactions
in the general journal of the City Hall Debt Fund. Control accounts
are not necessary.
b. Post the entries to the City Hall Debt Service Fund
ledger (t-accounts).
c. Prepare and post an entry closing all nominal accounts
to Fund Balance. Assume any remaining net resources are classified
as Fund Balance – Restricted for Debt Service.
5–C. Part 3. New Debt Service Fund
Transactions
On the advice of the city attorney, a City Jail Debt Service Fund
is opened to account for debt service transactions related to the
bond issue sold on January 1, 2020 (see Part 1).
Required:
a. Record the following transactions in the general
journal for the City Jail Debt Service Fund, as necessary. Control
accounts are not necessary.
b. Post the entries to the City Jail Debt Service Fund
ledger (t-accounts).
c. Prepare and post an entry closing all nominal accounts
to Fund Balance. Assume any remaining net resources are classified
as Fund Balance – Restricted for Debt Service.
5–C. Part 4. Governmental Funds Financial
Statements
Required:
a. Prepare a Balance Sheet for the governmental funds for
the City of Monroe as of December 31, 2020. Respective values for
the General Fund, the Street and Highway Fund are given. Include
the City Hall Debt Service Fund, and the City Jail Debt Service
Fund.
b. Prepare a Statement of Revenues, Expenditures, and
Changes in Fund Balances for the governmental funds for the City of
Monroe for the Year Ended December 31, 2020. Include the same funds
as listed in requirement a plus the City Jail Construction
Fund.
a.)
Trn. | Account Titles | Debit | Credit |
1) | Cash | $4,200,000 | |
Other financing sources-Proceeds from bonds | $4,000,000 | ||
Other financing sources-Premium on bonds | $200,000 | ||
Other financing uses-Transfer out | $200,000 | ||
Cash | $200,000 | ||
2) | Due from State Government | $1,335,000 | |
Revenues-Intergovernmental | $1,335,000 | ||
3) | Capital Expenditures | $119,000 | |
Cash | $119,000 | ||
4) | Encumbrances control | $250,000 | |
Budgetary Fund Balance-Reserve for Encumbrances | $250,000 | ||
5) | Budgetary Fund Balance-Reserve for Encumbrances | $50,000 | |
Encumbrances Control | $50,000 | ||
Capital Expenditures | $50,000 | ||
Cash | $50,000 | ||
6) | Budgetary Fund Balance-Reserve for Encumbrances | $150,000 | |
Encumbrances Control | $150,000 | ||
Capital Expenditures | $150,000 | ||
Cash | $150,000 | ||
7) | Encumbrances Control | $4,500,000 | |
Budgetary Fund Balance-Reserve for Encumbrances | $4,500,000 | ||
8) | Budgetary Fund Balance-Reserve for Encumbrances | $1,350,000 | |
Encumbrances Control | $1,350,000 | ||
Capital Expenditure | $1,350,000 | ||
Accounts payable | $1,282,500 | ||
Contracts payable- Retained percentage [$1350000 × 5%] | $67,500 | ||
9) | Cash | $1,335,000 | |
Due from State Government | $1,335,000 | ||
10) | Encumbrances Control | $459,500 | |
Budgetary Fund Balance-Reserve for Encumbrances | $459,500 | ||
11) | Accounts payable | $1,282,500 | |
Cash | $1,282,500 | ||
12) | Budgetary Fund Balance-Reserve for Encumbrances | $1,350,000 | |
Encumbrances Control | $1,350,000 | ||
Capital Expenditure | $1,350,000 | ||
Contracts payable- Retained percentage | $67,500 | ||
Accounts payable | $1,417,500 | ||
Accounts payable | $1,417,500 | ||
Cash | $1,417,500 | ||
13) | Budgetary Fund Balance-Reserve for Encumbrances | $459,300 | |
Encumbrances Control | $459,300 | ||
14) | Budgetary Fund Balance-Reserve for Encumbrances | $50,000 | |
Encumbrances Control | $50,000 | ||
Capital Expenditure | $50,000 | ||
Accounts payable | $50,000 | ||
15) | Accounts payable | $509,300 | |
Cash | $509,300 | ||
Other Financing Uses-transfer out |
$1806700 |
||
Cash | $1806700 |