Question

Part IV.   Capital Projects Fund

Prepare journal entries to record the following transactions of a state, identifying the funds affected by each transaction. Record journal entries for all funds affected. The state prepares a budget for the Capital Projects Fund and uses encumbrance accounting in that fund.                    

1. The state records its capital budget. It appropriates $10 million for highway construction, which will be financed entirely with the issuance of bonds.
2. The state sells 20-year 6% bonds having a face value of $10 million. The bonds are sold at a discount, so the state realizes a total of $9,900,000. Equal installments of principal will be paid every six months, together with interest on the unpaid balance.
3. The state awards two contracts, one for highway construction ($6,500,000) and one for construction supervision ($350,000). Both contracts provide for progress payments. The highway construction contract provides for 10% retainage pending completion of the project. There is no retainage on the construction supervision contract.
4. The construction contractor submits an invoice for $1,500,000. The invoice is approved and a voucher is prepared, less the 10% retainage.

Answer 1

No.	General Journal	Debit	Credit
a.	Capital Project Fund
	Estimated other financing sources	10,000,000
	Appropriations		10,000,000
b.	Capital Project Fund
	Cash	9,900,000
	Other financing use – bond issue discount	100,000
	Other financing source - long-term debt issued		10,000,000
c.	Capital Project Fund
	Encumbrances – capital project	6,850,000
	Budgetary fund balance reserved for encumbrances		6,850,000
d.	Capital Project Fund
	Budgetary fund balance reserved for encumbrances	1,500,000
	Encumbrances – capital project		1,500,000
	Expenditures - construction costs	1,500,000
	Construction contracts payable		1,350,000
	Retainage payable		150,000

**************************************************************Please Upvote......Its really usefull to us...If any querry comment below...I will resolve ASAP....Thank You....