Record the
Explanation of Solution
Debt service fund: The debt service fund is a fund that provides government to account for transactions related with the payment of principle and interest on its liabilities or debt.
Serial bond: Serial bonds are a debt security in which a portion of bonds matures at regular intervals until all of the bonds are matured.
Encumbrances: Encumbrances are charges made against appropriation for an estimated amount when the goods are being ordered. Encumbrances is a control account that controls appropriation of fund, controlling of appropriation will neither increase nor decrease of balances in the general fund during the fiscal year.
Capital project funds (CPFs): CPFs are used to report financial resources that are restricted, committed, or have been assigned to expenditure for capital spending inclusive of constructing and acquiring of capital facilities other than capital assets.
Record the journal entries in the debt service fund of Town MV:
Date | Account title and explanation | Amount | |
Debit | Credit | ||
(a) | Estimated Revenues | $350,000 | |
Appropriations (1) | $62,500 | ||
Budgetary Fund Balance | $287,500 | ||
(To record the revenues) | |||
(b) | No entry | ||
(c) | No entry | ||
(d) | No entry | ||
(e) | Cash | $50,000 | |
Other financing sources—Premium on Bonds (2) | $50,000 | ||
(To record the premium received on bonds) | |||
Estimated Other financing sources—Premium on Bonds (2) | $50,000 | ||
Budgetary Fund Balance | $50,000 | ||
(To record the premium received on bonds) | |||
(f) | No entry | ||
(g) | Expenditures— Interest (1) | $62,500 | |
Cash | $62,500 | ||
(To record the interest expenditures) | |||
(h) | Cash | $350,000 | |
Revenues | $350,000 | ||
(To record the revenues) | |||
(i) | No entry | ||
(j) | No entry | ||
(k) | No entry | ||
(l) | Appropriations (1) | $62,500 | |
Budgetary Fund | $337,500 | ||
Estimated Revenues | $350,000 | ||
Estimated Other financing sources - Premium on Bonds (2) | $50,000 | ||
(To record the revenues) | |||
Revenues | $350,000 | ||
Other financing sources—Premium on Bonds | $50,000 | ||
Expenditures - Interest | $62,500 | ||
Fund Balance -Restricted | $337,500 | ||
(To record the revenues and the expenditures) | |||
(m) | Estimated Revenues | $300,000 | |
Budgetary Fund Balance | $68,750 | ||
Appropriations (4) | $368,750 | ||
(To record the revenues) | |||
(n) | Cash | $250,000 | |
Revenues | $250,000 | ||
(To record the revenues) | |||
(o) | No entry | ||
(p) | No entry | ||
(q) | No entry | ||
(r) | Expenditures - Interest | $62,500 | |
Expenditures - Principal | $250,000 | ||
Cash | $312,500 | ||
(To record the expenditures) | |||
(s) | Cash | $120,000 | |
Other financing sources - Inter fund Transfers In | $120,000 | ||
(To record the cash collections from inter fund transfers) | |||
Estimated Other financing sources - Inter fund Transfers In | $120,000 | ||
Budgetary Fund Balance | $120,000 | ||
(To record the budgetary balance) |
Table (1)
Record the journal entries in the capital projects fund of Town MV:
Date | Account title and explanation | Amount | |
Debit | Credit | ||
(a) | No Entry | ||
(b) | Cash | $1,000,000 | |
Other financing sources – Inter fund Transfers In | $1,000,000 | ||
(To record the cash received from inter fund transfers) | |||
(c) | Construction Expenditures | $200,000 | |
Cash | $200,000 | ||
(To record the construction expenditure) | |||
(d) | Encumbrances | $4,500,000 | |
Encumbrances Outstanding | $4,500,000 | ||
(To record the outstanding contract) | |||
(e) | Cash | $2,500,000 | |
Other financing sources—Proceeds of Bonds | $2,500,000 | ||
(To record the bonds payable ) | |||
(f) | Construction Expenditures | $50,000 | |
Cash | $50,000 | ||
(To record the construction expenditure) | |||
(g) | No Entry | ||
(h) | No Entry | ||
(i) | Encumbrances Outstanding | $2,500,000 | |
Construction Expenditures | $2,500,000 | ||
Encumbrances | $2,500,000 | ||
Contracts Payable | $2,500,000 | ||
(To record the construction expenditure and the outstanding contract) | |||
(j) | Contracts Payable | $2,500,000 | |
Contracts payable - Retained | $125,000 | ||
Cash | $2,375,000 | ||
(To record the payables) | |||
(k) | Cash | $1,500,000 | |
Revenues | $1,500,000 | ||
(To record the cash received from revenues) | |||
(l) | Revenues | $1,500,000 | |
Other financing sources - Inter fund Transfers In | $1,000,000 | ||
Other financing sources - Proceeds of Bonds | $2,500,000 | ||
Construction Expenditures | $2,750,000 | ||
Fund Balance - Restricted | $1,250,000 | ||
Fund Balance - Assigned | $1,000,000 | ||
(To record the revenues and expenditures) | |||
(m) | No Entry | ||
(n) | No Entry | ||
(o) | Encumbrances Outstanding | $2,000,000 | |
Construction Expenditures | $2,000,000 | ||
Encumbrances | $2,000,000 | ||
Contracts Payable | $2,000,000 | ||
(To record the construction expenditure and the outstanding contract) | |||
(p) | Construction Expenditures | $130,000 | |
Cash | $130,000 | ||
(To record the investment) | |||
(q) | Contacts Payable | $2,000,000 | |
Contracts payable—Retained | $125,000 | ||
Cash | $2,125,000 | ||
(To record the payables) | |||
(r) | No Entry | ||
(s) | Fund Balance - Restricted | $1,250,000 | |
Fund Balance - Assigned | $880,000 | ||
Construction Expenditures | $2,130,000 | ||
(To record the fund balance) | |||
Other financing uses—Inter fund Transfers Out | $120,000 | ||
Cash | $120,000 | ||
(To record the inter fund transfers-out) | |||
Fund Balance— Assigned | $120,000 | ||
Other financing uses—Inter fund Transfers Out | $120,000 | ||
(To record the fund balance) |
Table (2)
Record the journal entries in the governmental activities at the government wide level of Town MV:
Date | Account title and explanation | Amount | |
Debit | Credit | ||
(a) | No Entry | ||
(b) | No Entry | ||
(c) | Construction Work in process | $200,000 | |
Cash | $200,000 | ||
(To record the expenditures) | |||
(d) | No Entry | ||
(e) | Cash | $2,550,000 | |
Premium on Bonds Payable | $50,000 | ||
Bonds Payable | $2,500,000 | ||
(To record the payables) | |||
(f) | Construction Work in process | $50,000 | |
Cash | $50,000 | ||
(To record the expenditures) | |||
(g) | Premium on Bonds Payable | $1,250 | |
Expenses—Interest | $61,250 | ||
Cash | $62,500 | ||
(To record the payable and expense) | |||
(h) | Cash | $350,000 | |
General Revenue - Taxes | $350,000 | ||
(To record the revenues) | |||
(i) | Construction Work in process | $2,500,000 | |
Contracts Payable | $2,500,000 | ||
(To record the payables) | |||
(j) | Contracts Payable | $2,500,000 | |
Contracts payable—Retained | $125,000 | ||
Cash | $2,375,000 | ||
(To record the payables) | |||
(k) | Cash | $1,500,000 | |
General government revenue-capital granted and contributed | $1,500,000 | ||
(To record the revenues) | |||
(l) | No entry | ||
(m) | No entry | ||
(n) | Cash | $250,000 | |
General Revenue - Taxes | $250,000 | ||
(To record the tax revenues) | |||
(o) | Construction Work in process | $2,000,000 | |
Contracts Payable | $2,000,000 | ||
(To record the payables) | |||
(p) | Construction Work in process | $130,000 | |
Cash | $130,000 | ||
(To record the expenditures) | |||
(q) | Contacts Payable | $2,000,000 | |
Contracts payable—Retained | $125,000 | ||
Cash | $2,125,000 | ||
(To record the payables) | |||
(r) | Premium on Bonds Payable | $1,250 | |
Expenses—Interest | $61,250 | ||
Bonds Payable | $250,000 | ||
Cash | $312,500 | ||
(To record the payables) | |||
(s) | Buildings | $4,750,000 | |
Improvements Other than Buildings | $130,000 | ||
Construction Work in process | $4,880,000 |
Table (3)
Working note 1: Compute the appropriation for first semi-annual interest payment:
The bond value is $2,500,000 and rate of interest is 5% and it is paid semi-annually.
Working note 2: Compute premium on bonds:
The premium is 2%
Working note 3: Compute second semi-annual interest payment:
The bond value is $2,250,000
Working note 4: Compute appropriations:
It is given that appropriation amount includes principal payment on April 1 of $250,000 and two interest payment of serial bond. The principal amount and two-interest payment amount must be added together to ascertain the amount of appropriation. The first semi-annual interest payment amount is $62,500 (1) and second is $56,250 (3). Thus, the appropriation is calculated as follows:
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ACCOUNTING F/GOV.+..(LL)-W/CODE>CUSTOM<
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