Question

Residents from the Town of Mountain View authorized a $7,400,000 renovation to their historic town hall on November 15, 2016. Financing for the project consists of $2,800,000 from a 5 percent serial bond issue, $2,400,000 from a state grant, and $2,200,000 from the General Fund. Debt service for the serial bonds will be provided by a one-quarter-cent city sales tax imposed on every dollar of sales in the city. The town has a calendar year-end.

Prepare journal entries to record the related transactions in the town’s capital projects fund, debt service fund, and governmental activities at the government-wide level. (Do not round intermediate calculations. If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field.) Transaction Fund General Journal Debit Credit a. Record the 2017 budget for the Serial Debt Service Fund. $260,000 of sales taxes are expected to be collected in 2017; the only appropriation is expected to be six months of interest on the serial bond. a Debt Service fund Capital Projects Fund Governmental Activities b. The town transfers $2,200,000 from the General Fund to a newly established capital projects fund. b Debt Service fund Capital Projects Fund Governmental Activities c. Planning and architect’s fees for the town hall renovation are paid in the amount of $270,000. c Debt Service fund Capital Projects Fund Governmental Activities d. The town hall renovation construction contract is awarded to a local contractor, Central Paving and Construction, for $6,142,000. d Debt Service fund Capital Projects Fund Governmental Activities e. On April 1, 2017, the town issues serial bonds with a face value totaling $2,800,000 and having maturities ranging from one to 20 years at 104. The bonds bear interest of 5 percent per annum, payable semiannually on April 1 and October 1. e(1) Debt Service fund Record the issue of bonds in the Debt Service Fund e(2) Premiums on bonds issued must be deposited directly in the debt service fund and are restricted for debt service. (Remember to amend the debt service fund budget, since this premium was not anticipated.) e(3) Capital Projects Fund Premiums are amortized using the straight-line method over 40 interest periods. Record the issue of bonds. e(4) Governmental Activities Record the issue of bonds. f. The capital projects fund paid the city’s Utility Fund $40,000 for wiring associated with the renovation. No encumbrance had been recorded for this service. f Debt Service fund Capital Projects Fund Governmental Activities g. On October 1, 2017, the city mailed checks to bondholders for semiannual interest on the bonds. g Debt Service fund Capital Projects Fund Governmental Activities h. Sales taxes earmarked for debt service of $260,000 were collected. h Debt Service fund Capital Projects Fund Governmental Activities i. Central Paving and Construction submitted a progress billing to the town for $2,800,000. The city’s public works inspector agrees that all milestones have been met for this portion of the work. i Debt Service fund Capital Projects Fund Governmental Activities j. The town paid Central Paving and Construction the amount it had billed, except for 5 percent that was withheld as a retained percentage per terms of the contract. j Debt Service fund Capital Projects Fund Governmental Activities k. Grant funds totaling $2,400,000 are received from the state historical society, since eligible expenditures have been made. k Debt Service fund Capital Projects Fund Governmental Activities l

Answer 1

Transaction	Fund	General Journal	Debit	Credit
a. Record the 2017 budget for the Serial Debt Service Fund. $260,000 of sales taxes are expected to be collected in 2017; the only appropriation is expected to be six months of interest on the serial bond.
a	Debt Service fund	Estimated Revenues	$260,000.00
		Appropriations ($2800000 x 5% x 6/12)		$70,000.00
		Budgetary Fund Balance		$190,000.00
	Capital Projects Fund	No Journal Entry Required
	Governmental Activities	No Journal Entry Required
b. The town transfers $2,200,000 from the General Fund to a newly established capital projects fund.
b	Debt Service fund	No Journal Entry Required
	Capital Projects Fund	Cash	$2,200,000.00
		Other Financing sources-Interfund Transfers in		$2,200,000.00
	Governmental Activities	No Journal Entry Required
c. Planning and architect’s fees for the town hall renovation are paid in the amount of $270,000.
c	Debt Service fund	No Journal Entry Required
	Capital Projects Fund	Construction Expenditures	$270,000.00
		Cash		$270,000.00
	Governmental Activities	Construction Work in Progress	$270,000.00
		Cash		$270,000.00
d. The town hall renovation construction contract is awarded to a local contractor, Central Paving and Construction, for $6,142,000.
d	Debt Service fund	No Journal Entry Required
	Capital Projects Fund	Encumbarances	$6,142,000.00
		Encumbrances outstanding		$6,142,000.00
	Governmental Activities	No Journal Entry Required
e. On April 1, 2017, the town issues serial bonds with a face value totaling $2,800,000 and having maturities ranging from one to 20 years at 104. The bonds bear interest of 5 percent per annum, payable semiannually on April 1 and October 1.
e(1)	Debt Service fund	Record the issue of bonds in the Debt Service Fund
		Cash ($2,800,000 x (104% -100%)	$112,000.00
		Estimated Other Financing Sources - Premium on Bonds		$112,000.00
e(2)		Premiums on bonds issued must be deposited directly in the debt service fund and are restricted for debt service. (Remember to amend the debt service fund budget, since this premium was not anticipated.)
		Estimated Other Financing Sources - Premium on Bonds	$112,000.00
		Budgetary Fund Balance		$112,000.00
e(3)	Capital Projects Fund	Premiums are amortized using the straight-line method over 40 interest periods. Record the issue of bonds.
		Cash	$2,800,000.00
		Other financing sources- Proceeds from Bonds		$2,800,000.00
e(4)	Governmental Activities	Record the issue of bonds.
		Cash	$2,912,000.00
		Premium on Bonds		$112,000.00
		Bonds Payable		$2,800,000.00
f. The capital projects fund paid the city’s Utility Fund $40,000 for wiring associated with the renovation. No encumbrance had been recorded for this service.
f	Debt Service fund	No Journal Entry Required
	Capital Projects Fund	Construction Expenditures	$40,000.00
		Cash		$40,000.00
	Governmental Activities	Construction Work in Progress	$40,000.00
		Cash		$40,000.00
g. On October 1, 2017, the city mailed checks to bondholders for semiannual interest on the bonds.
g	Debt Service fund	Expenditures - Interest	$70,000.00
		Cash		$70,000.00
	Capital Projects Fund	No Journal Entry Required
	Governmental Activities	Premium on Bonds Payable ($112,000 /(20 years x 2)	$2,800.00
		Expenses- Interest on Long Term Debt	$67,200.00
		Cash		$70,000.00
h. Sales taxes earmarked for debt service of $260,000 were collected.
h	Debt Service fund	Cash	$260,000.00
		Revenues		$260,000.00
	Capital Projects Fund	No Journal Entry Required
	Governmental Activities	Cash	$260,000.00
		General Revenue- Taxes		$260,000.00
i. Central Paving and Construction submitted a progress billing to the town for $2,800,000. The city’s public works inspector agrees that all milestones have been met for this portion of the work.
i	Debt Service fund	No Journal Entry Required
	Capital Projects Fund	Encumbrances Outstanding	$2,800,000.00
		Construction Expenditures	$2,800,000.00
		Encumbrances		$2,800,000.00
		Contracts Payable		$2,800,000.00
	Governmental Activities	Construction Work in progress	$2,800,000.00
		Contracts Payable		$2,800,000.00
j. The town paid Central Paving and Construction the amount it had billed, except for 5 percent that was withheld as a retained percentage per terms of the contract.
j	Debt Service fund	No Journal Entry Required
	Capital Projects Fund	Contracts Payable	$2,800,000.00
		Contracts Payable- Retained percentage		$140,000.00
		Cash		$2,660,000.00
	Governmental Activities	Contracts Payable	$2,800,000.00
		Contracts Payable- Retained percentage		$140,000.00
		Cash		$2,660,000.00
k. Grant funds totaling $2,400,000 are received from the state historical society, since eligible expenditures have been made.
k	Debt Service fund	No Journal Entry Required
	Capital Projects Fund	Cash	$2,400,000.00
		Revenues		$2,400,000.00
	Governmental Activities	Cash	$2,400,000.00
		Programme Revenue- General Government		$2,400,000.00