Question

During FY 2017, the voters of Surprise County approved construction of a $22 million police facility and an $12 million fire station to accommodate the county’s population growth. The construction will be financed by tax-supported bonds in the amount of $30 million, a $2 million economic stimulus grant, and a portion of future use tax revenues. During 2017, the following events and transactions occurred.

Required

a.

Prepare journal entries to record the the following transactions in a single Surprise County Construction Fund and governmental activities general journal at the government-wide level. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field. Enter your answers in whole dollar amounts and not in millions.)

Transaction Fund General Journal Debit Credit 1. Issued $130,000 of 6 percent bond anticipation notes to cover preliminary planning and engineering expenses. 1 Construction Fund Governmental Activities 2. Incurred architecture and engineering costs in the amount of $63,000. They were split evenly between the two projects. 2 Construction Fund Governmental Activities 3. Entered into a construction contract for $34 million—$22 million was for the police facility and $12 million was related to the fire station. 3 Construction Fund Governmental Activities 4. Issued the $30 million, 20-year 8% bonds at 101. (The premium should be recorded in a debt service fund. You do not need to record this entry.) 4 Construction Fund Governmental Activities 5. Paid off the bond anticipation notes that had been outstanding 180 days. (Interest is an expenditure of the capital projects fund.) Assume 360 days in a year. 5 Construction Fund Governmental Activities 6. An invoice for $17 million was received from the contractor for a portion of police facility construction ($10 million) and fire station construction ($7 million). 6a Construction Fund Record the appropriation of funds towards completed portion of the police facility and the fire station. 6b Record the construction Work-in-progress of the police facility and the fire station in the capital project fund. 6c Governmental Activities Record the construction Work-in-progress of the police facility and the fire station. 7. Half of the grant funds were received in cash. The remainder is anticipated in 2018; however, the grantor notified the county that there is no guarantee that the federal government will appropriate the 2018 portion. 7 Construction Fund Governmental Activities 8. The initial construction invoice, less 5% retainage, was paid. 8 Construction Fund Governmental Activities 9. The fire station was completed, and a final invoice for the remaining $5 million was received. All fire station construction charges incurred can be capitalized as buildings. 9a Construction Fund Record the appropriation of funds towards completion the fire station. 9b Record the completion of the fire station construction contract. 9c Governmental Activities Record the appropriation of funds towards completion the fire station. 9d Record the completion of the fire station construction contract. 10. Following inspection, the fire station invoices were paid in full. 10 Construction Fund Governmental Activities 11. At year-end, the contractor billed the county an additional $7 million for the police facility; however, the police facility was incomplete. 11a Construction Fund Record the appropriation of funds towards the police facility. 11b Record the police facility construction work-in-progress. 11c Governmental Activities Record the police facility construction work-in-progress. 12. Temporary accounts were closed at year-end. Assume that the fund balances are all restricted. 12 Construction Fund Governmental Activities

Answer 1

Solution:

a) Preparing Journal Entries to Record the Following Transactions in a Single Surpirse County Construction Fund and governmental activities general journal at the government-wide level:

Date	General Journal	Debit	Credit
1	Construction Fund
	Cash	$130,000
	Other Financing Sources -Proceeds of Bond Anticipation Notes		$130,000
	Governmental Activities
	Cash	$130,000
	Bond Anticipation Notes Payable		$130,000
2	Construction Fund
	Construction Expenditures - Police	$31,500
	Construction Expenditures - Fire	$31,500
	Vouchers Payable		$63,000
	Governmental Activities
	Construction Expenditures - Police	$31,500
	Construction Expenditures - Fire	$31,500
	Vouchers Payable		$63,000
3	Construction Fund
	Encumbrances - Police	$22,000,000
	Encumbrances - Fire	$12,000,000
	Encumbrances Outstanding - Police		$22,000,000
	Encumbrances Outstanding - Fire		$12,000,000
	Governmental Activities
	No Entry
4	Construction Fund
	Cash	$30,000,000
	Other Financing Sources - Proceeds of Bonds		$30,000,000
	Governmental Activities
	Cash	$30,300,000
	Bonds Payable		$30,000,000
	Premium on bonds payable		$30,000
5	Construction Fund
	Other Financing Uses - Repayment of BAN's	$130,000
	Interest Expenditures ($130,000 * 0.06 *180/360)	$3,900
	Cash		$133,900
	Governmental Activities
	Bond Anticipation notes payable	$130,000
	Expenses - Interest on BAN's	$3,900
	Cash		$133,000
6 a	Construction Fund
	Encumbrances Outstanding - Police	$10,000,000
	Encumbrances Outstanding - Fire	$7,000,000
	Encumbrances - Police		$10,000,000
	Encumbrances - Fire		$7,000,000
6 b	Construction Expenditures - Police	$10,000,000
	Construction Expenditures - Fire	$7,000,000
	Contracts Payable		$17,000,000
6 c	Governmental Activities
	Construction Expenditures - Police	$10,000,000
	Construction Expenditures - Fire	$7,000,000
	Contracts Payable		$17,000,000
7	Construction Fund
	Cash	$1,000,000
	Revenues		$1,000,000
	Governmental Activities
	Cash	$1,000,000
	Programs Revenues - Economic Development - Capital Grants and Contributions		$1,000,000
8	Construction Fund
	Contracts Payable	$17,000,000
	Contracts Payable - Retained Percentage		$850,000
	Cash		$16,150,000
	Governmental Activities
	Contracts Payable	$17,000,000
	Contracts Payable - Retained Percentage		$850,000
	Cash		$16,150,000
9 a	Construction Fund
	Encumbrances Outstanding - Fire	$5,000,000
	Encumbrances - Fire		$5,000,000
9 b	Construction Expenditures - Fire	$5,000,000
	Contracts Payable		$5,000,000
9 c	Governmental Activities
	Construction Work in Progress - Fire	$5,000,000
	Contracts Payable		$5,000,000
9 d	Buildings	$12,000,000
	Construction Work in Progress		$12,000,000
10	Construction Fund
	Contracts Payable	$5,000,000
	Contracts Payable - Retained Percentage	$300,000
	Cash		$5,300,000
	Governmental Activities
	Contracts Payable	$5,000,000
	Contracts Payable - Retained Percentage	$300,000
	Cash		$5,300,000
11 a	Construction Fund
	Encumbrances Outstanding - Police	$7,000,000
	Encumbrances - Police		$7,000,000
11 b	Construction Expenditures - Police	$7,000,000
	Contracts Payable		$7,000,000
11 c	Governmental Activities
	Construction Expenditures - Police	$7,000,000
	Contracts Payable		$7,000,000
12	Construction Fund
	Other Financing Sources - Proceeds of Bond Anticipation notes	$130,000
	Other Financing Sources - Proceeds of Bond	$30,000,000
	Revenues	$1,000,000
	Construction Expenditures - Police		$17,031,500
	Construction Expenditures - Fire		$12,031,500
	Interest Expenditures		$3,900
	Other Financing Uses - Repayment of BAN's		$130,000
	Fund Balance - Restricted		$1,933,100