Prepare entries to record the following transactions related to the construction
ID: 2490739 • Letter: P
Question
Prepare entries to record the following transactions related to the construction of a building by the Village of Silver Springs. The Village adopts a formal budget and uses encumbrance accounting. Make all required entries for the Capital Projects Fund only.
a. The Village Council adopts a capital budget at the beginning of the year. To finance construction of the building, the Village will transfer $3,000,000 from its General Fund and apply for a state grant of $1,000,000. It appropriates $3.6 million for construction and '$400,000 for furniture and equipment.
b. The General Fund transfers $3,000,000 to the Capital Projects Fund for the new project
c. The state approves Silver Springs' application for a $1,000,000 construction grant and simultaneously sends a check to the Village.
d. Silver Springs awards a construction contract in the amount of $3,400,000.
e. The contractor sends a progress billing to Silver Springs in the amount of $1,600,000. The bill is approved by the Village engineers and a voucher is prepared, less a 10% retainage pending completion of the building and final approval by the Village. Silver Spring considers 25% of the billing to be the state's share of the cost.
f. The voucher in "e" above is paid.
g. The contractor encounters construction problems due to unforeseen soil conditions. As a result, Silver Springs authorizes a change order for '$200,000
h. The contractor completes construction and sends Silver Springs an invoice for the remaining $2,000,000. The Village engineers inspect the building and accept the work. The invoice is approved and paid, together with the amount retained on the progress billing in "e" above. Silver Springs considers 25% of the billing to be the state's share of the cost.
Explanation / Answer
Answer:
a. Estimated other financing sources 3,000,000
Estimated revenues 1,000,000
Appropriations 4,000,000
b. Cash 3,000,000
Transfer in from General Fund 3,000,000
c. Cash 1,000,000
Advance on construction grant 1,000,000
d. Encumbrances 3,400,000
Budgetary fund balance reserved for encumbrances 3,400,000
e. Budgetary fund balance reserved for encumbrances 1,600,000
Encumbrances 1,600,000
Expenditures - construction costs 1,600,000
Construction contracts payable 1,440,000
Retainage payable 160,000
Advance on construction grant 400,000
Revenues - construction grant 400,000
f. Construction contracts payable 1,440,000
Cash 1,440,000
g. Encumbrances 200,000
Budgetary fund balance reserved for encumbrances 200,000
h. Budgetary fund balance reserved for encumbrances 2,000,000
Encumbrances 2,000,000
Expenditures - construction costs 2,000,000
Construction contracts payable 2,000,000
Construction contracts payable 2,000,000
Retainage payable 160,000
Cash 2,160,000
Advance on construction grant 500,000
Revenues - construction grant 500,000