Question

In Fulbright County, the Parks and Recreation Department constructed a library in one of the county’s high growth areas. The construction was funded by a number of sources. Below is selected information related to the Library Capital Project Fund. All activity related to the library construction occurred within the 2017 fiscal year.

Required

Prepare a journal entry for capital projects fund and governmental activities at the government-wide level. (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 1. The city received a donation of land that is to be used by Parks and Recreation to develop a public park. At the time of the donation, the land had a fair value of $4,600,000 and was recorded on the donor’s books at a historical cost of $3,900,000. 1 General Fund Governmental Activities 2. The Public Works Department sold machinery with a historical cost of $34,500 and accumulated depreciation of $28,400 for $5,600. The machinery had originally been purchased with special revenue funds. 2 General Fund Governmental Activities 3. A car was leased for the mayor’s use. Since the term of the lease exceeded 75 percent of the useful life of the car, the lease was capitalized. The first payment was $1,100 and the present value of the remaining lease payments was $24,000. 3a General Fund 3b Governmental Activities Record the lease of car to the Mayor. 4. During the current year, a capital projects fund completed a new public safety building that was started in the prior year. The total cost of the project was $9,570,000. Financing for the project came from a $8,880,000 bond issue that was sold in the prior year, and from a $690,000 federal capital grant received in the current year. Current year expenditures for the project totaled $1,116,000. The full cost is attributed to the building since it was constructed on city-owned property. 4a Capital Project Fund Record the funds received for the public safety building. 4b Record the current year's expenditure for the public safety building. 4c Governmental Activities Record the funds received for the public safety building. 4d Record the current year's expenditure for the public safety building. 4e Record the transfer of the work in progress to the capital asset. 5. Due to technological developments, the city determined that the service capacity of some of the technology equipment used by general government had been impaired. The calculated impairment loss due to technology obsolescence was $1,096,000. 5 General Fund Governmental Activities

Answer 1

Recording Capital Projects Fund Transactions. In Erikus County, the Parks and Recreation Department constructed a library in one of the county’s high growth areas. The construction was funded by a number of sources. Below is selected information related to the funding and closing of the Library Capital Project Fund. All activity related to the library construction occurred within the 2011 fiscal year.

1. The county issued $6,000,000, 4 percent bonds, with interest payable semiannually on June 30 and December 31. The bonds sold for 101 on July 30, 2010. Proceeds from the bonds were to be used for construction of the library, with all interest and premiums received to be used to service the debt issue.

2. A $650,000 federal grant was received to help finance construction of the library.

3. The Library Special Revenue Fund transferred $250,000 for use in construction of the library.

4. A construction contract was awarded in the amount of $6,800,000.

5. The library was completed on June 1, 2011, four months ahead of schedule. Total construction expenditures for the library amounted to $6,890,000. When the project was completed, the cost of the library was allocated as follows: $200,000 to land, $6,295,000 to building, and the remainder to equipment.

6. The capital projects fund was closed. It was determined that remaining funds were related to the bond issue, and thus they were appropriately transferred to the debt service fund.

	Debits	Credits
Capital Projects Fund:
Cash	6,000,000
Other Financing Sources – Proceeds of Bonds		6,000,000
Governmental Activities:
Cash	6,080,000
Bonds Payable		6,000,000
Premium on Bonds Payable		60,000
Accrued Interest Payable (or Expenses – Interest on Bonds)		20,000

	Debits	Credits
Capital Projects Fund:
Cash	650,000
Revenues		650,000
Governmental Activities:
Cash	650,000
Program Revenues – Parks & Recreation – Capital Grants & Contributions		650,000
Capital Projects Fund:
Cash	250,000
Other Financing Sources – Interfund Transfers In		250,000
Governmental Activities:
No entry when transfers are between governmental funds

	Debits	Credits
Capital Projects Fund:
Encumbrances	6,800,000
Reserve for Encumbrances		6,800,000
Governmental Activities:
Budgetary transactions are not recorded in the governmental activities journal
Capital Projects Fund:
Construction Expenditures	6,890,000
Cash		6,890,000
Reserve for Encumbrances	6,800,000
Encumbrances		6,800,000
Governmental Activities:
Construction Work in Progress		6,890,000
Cash		6,890,000
Land	200,000
Buildings	6,295,000
Equipment	395,000
Construction Work In Progress	6,890,000
Capital Projects Fund:
To close nominal accounts:
Other Financing Sources – Proceeds of Bonds	6,000,000
Other Financing Sources – Interfund Transfers In	250,000
Revenues		650,000
Construction of Expenditures		6,890,000
Fund Balance		10,000
To close the fund:
Interfund Transfers Out	10,000
Cash		10,000
Fund Balance	10,000
Interfund Transfers Out		10,000
Governmental Activities:
No entry since the closing only relates to the fund.