Watson Township plans to build an auditorium. The plans were drawn by an architect who will complete the plans and bill the city for $115,000 after the bonds are issued. The township accepted a bid from Forrester Contractors for $9,200,000 for the entire project, which should take 2 years to build. It will not be started until October 1, 2021, so the projected completion date is September 30, 2023. The township's accounting supervisor plans to establish a Debt Service Fund to accumulate resources for repaying the bonds that will be issued to finance the project. These bonds will be serviced from property tax revenues and are expected to be issued at a face amount of $9,200,000. During 2021, $115,000 of investment revenue is expected to be available for construction purposes. The bonds will pay interest on April 1 and October 1 of each year, beginning in 2022. Prepare the journal entries needed to (1) record the budget and (2) the encumbrance in the appropriate funds for calendar year 2021, based on the preceding budgetary information. Account Debit Credit Capital Projects fund 1. Capital Projects fund > > >

Watson Township plans to build an auditorium. The plans were drawn by an architect who will complete the plans and bill the city for $115,000 after the bonds are issued. The township accepted a bid from Forrester Contractors for $9,200,000 for the entire project, which should take 2 years to build. It will not be started until October 1, 2021, so the projected completion date is September 30, 2023. The township's accounting supervisor plans to establish a Debt Service Fund to accumulate resources for repaying the bonds that will be issued to finance the project. These bonds will be serviced from property tax revenues and are expected to be issued at a face amount of $9,200,000. During 2021, $115,000 of investment revenue is expected to be available for construction purposes. The bonds will pay interest on April 1 and October 1 of each year, beginning in 2022. Prepare the journal entries needed to (1) record the budget and (2) the encumbrance in the appropriate funds for calendar year 2021, based on the preceding budgetary information. Account Debit Credit Capital Projects fund 1. Capital Projects fund > > >

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

A city starts a solid waste landfill that it expects to fill to capacity gradually over a 12-year period. At the end of the first year, it is 7 percent filled. At the end of the second year, it is 17 percent filled. Currently, the cost of closure and postclosure is estimated at $1 million. None of this amount will be paid until the landfill has reached its capacity. Which of the following is true for the Year 2 government-wide financial statements? a. Expense will be $100,000 and liability will be $170,000. b. Both expense and liability will be $100,000. c. Expense will be $90,000 and liability will be $180,000. d. Both expense and liability will be zero.
Voters of Valdez School District, a public school district, approved construction of a new high school at a cost not to exceed $20 million. The district will finance the construction by issuing $20 million of 6 percent term bonds payable in 20 years. Because the site had already been prepared, the school district began construction immediately but the bonds would not be issued for nearly a year. Shortly before the fiscal year-end, the school district borrowed $5 million from a local bank due in one year with interest at 6.2 percent. The note will be repaid from bond proceeds. The school district secured a financing agreement with the bank to convert the debt to a 10-year debt if the school district is unable to sell the bonds by the due date. At year-end, how should the $5 million note be displayed in the government-wide financial statements? A.) Notes payable-long term $5 million; B.) Notes payable-short term $5 million; C.) Nothing D.) None of above
This year Southfork began work on a senior center to hold activities for its growing senior citizen population. It is to be financed by a $5,000,000 bond issue, a $500,000 grant, and a $500,000 General Fund transfer. The following transactions occurred during the current year: The General Fund transferred $500,000 to the Senior Center Capital Projects Fund. A plot of land was purchased for $400,000 in cash. (This cost had not been encumbered.) Preliminary planning and engineering costs of $95,000 were vouchered. (This cost had not been encumbered.) A contract was signed with Sunset Construction Company for the major part of the project on a bid of $4,950,000. The $5,000,000 bonds were issued at par. Temporary investments were purchased at a cost of $3,500,000. A payable was recorded for a $49,500 billing from the Water and Sewer enterprise fund for the cost of extending water pipes to the new building. (This cost had not been encumbered.) An invoice in the amount of $1,500,000 was…
This year Riverside began work on an outdoor amphitheater and concession stand at the city’s park. It is to be financed by a $5,500,000 bond issue and supplemented by a $700,000 General Fund transfer. The following transactions occurred during the current year: The General Fund transferred $700,000 to the Park Building Capital Projects Fund. A contract was signed with Restin Construction Company for the major part of the project on a bid of $4,700,000. Preliminary planning and engineering costs of $89,000 were vouchered for the Great Pacific Engineering Company. (This cost had not been encumbered.) A payable was recorded for an $28,500 billing from the Water and Sewer enterprise fund for the cost of extending water pipes to the new concession stand. An invoice in the amount of $2,000,000 was received from Restin for progress to date on the project. The $5,500,000 bonds were issued at par. The amount billed by the contractor (see Transaction 5) less 5 percent retained was paid.…
You are tasked with calculating the property tax needed to fund the construction and operation of a $22.5 million complex. The facility's annual operating budget is forecast at $3.6 million, to be covered by revenues from programs offered at the facility. A 30-year general obligation bond with a rate of 5.5% will be issued to pay for the facility's construction costs. The net assessed value of property in the municipality is $725 million. Calculate the amount that must be set aside each year to meet the bond's principal and interest obligations over 30 years. Calculate the additional mileage required to cover the project's debt service. For an owner of the property with a total assessed value of $15,000, by how much will his/her property tax increase?
On January 1, 2017, the City of Hastings created a solid waste landfill that it expects to reach capacity gradually over the next 20 years. If the landfill were to be closed at the current time, closure costs would be approximately $1.2 million plus an additional $700,000 for postclosure work. Of these totals, the city must pay $50,000 on December 31 of each year for preliminary closure work. At the end of 2017, the landfill reached 3 percent of capacity. At the end of 2018, the landfill reached 9 percent of capacity. Also at the end of 2018, a reassessment is made; total closure costs are determined to be $1.4 million rather than $1.2 million.a. Assuming that the landfill is viewed as an enterprise fund, what journal entries are made in 2017 and 2018 on the government-wide financial statements?b. Assuming that the landfill is reported within the general fund, what journal entries are made in 2017 and 2018 on the government-wide financial statements?c. Assuming that the landfill is…
On January 1, 2017, the City of Hastings created a solid waste landfill that it expects to reach capacity gradually over the next 20 years. If the landfill were to be closed at the current time, closure costs would be approximately $1.2 million plus an additional $700,000 for postclosure work. Of these totals, the city must pay $50,000 on December 31 of each year for preliminary closure work. At the end of 2017, the landfill reached 3 percent of capacity. At the end of 2018, the landfill reached 9 percent of capacity. Also at the end of 2018, a reassessment is made; total closure costs are determined to be $1.4 million rather than $1.2 million. Assuming that the landfill is viewed as an enterprise fund, what journal entries are made in 2017 and 2018 on the government-wide financial statements? Assuming that the landfill is reported within the general fund, what journal entries are made in 2017 and 2018 on the government-wide financial statements? Assuming that the landfill is viewed…
At the start of Year 1, the City Peacock leases 30 computers for use by various officials in school administration and public safety at a total cost of $90,000 per year. The first lease payment is made immediately. The contracts are for 5 years, the expected life of the computers. After that period, the city will return them to the lessor. What reporting is appropriate for the city of the first year? Assume the city has an annual incremental borrowing rate of 8%
A city is considering buying a piece of land for $500,000 and constructing an office complex on it. Their planning horizon is 20 years. Three mutually exclusive building designs (shown below) have been drawn up by an architectural firm. Use the modified benefit-cost ratio method and a MARR of 10% per year to determine which alternative, if any, should be recommended to the city council.
A city government is considering two types oftown-dump sanitary systems. Design A requires aninitial outlay of $400,000 with annual operating andmaintenance costs of $50,000 for the next 15 years;design B calls for an investment of $300,000 withannual operating and maintenance costs of $80,000per year for the next 15 years. Fee collections fromthe residents would again be $85,000 per year. Theinterest rate is 8%, and no salvage value is associatedwith either system.(a) Using the benefit–cost ratio BC(i), which systemshould be selected?M16_PARK9091_06_GE_C16.indd 901 10/22/15 5:22 PM902 Chapter 16 Economic Analysis in the Service SectIf a new design (design C), which requires aninitial outlay of $350,000 and annual operatingand maintenance costs of $65,000, is proposed,would your answer in part (a) change?
Assume that as a local government financial analyst you are asked to project the feasibility of a loan to a proposed public service venture for its start-up funding. The venture’s principals estimate that, at the end of 5 years, they will be able to pay back up to $800,000 from revenues accruing to the venture’s activities. Assuming that your organization’s current “average cost of capital” is 4.8% (the “discount rate”). Assuming monthly compounding, what is the maximum amount your government can commit to the venture for its start-up?
A manufacturing company has determined that it will need $600,000 in 6 years for a new roof on its southeastern regional warehouse. A sinking fund is established for the roof at 3.6% compounded semiannually. What equal payments (in $) are required every 6 months to accumulate the needed funds for the roof? (Round your answer to the nearest cent.)