Capital Projects Fund Transactions The voters of the City of Monroe approved the
ID: 2777890 • Letter: C
Question
Capital Projects Fund Transactions
The voters of the City of Monroe approved the issuance of tax-supported bonds in the face amount of $4,000,000 for the construction and equipping of a new City Jail. Architects were to be retained, and construction was to be completed by outside contractors. In addition to the bond proceeds, a $1,320,000 grant was expected from the state government.
Required:
a. Open a general journal for the City Jail Annex Construction Fund. Record the following transactions and post to the general ledger. Control accounts are not necessary:
(1) On January 1, 2015, the total face amount of bonds bearing an interest rate of 8 percent was sold at a $200,000 premium. Principal amounts of $200,000 each will come due annually over a 20-year period commencing January 1, 2016. Interest payment dates are July 1 and January 1. The first interest payment will be July 1, 2015. The premium was transferred to the City Jail Debt Service Fund for the future payment of principal on the bonds.
(2) The receivable from the state government was recorded.
(3) Legal and engineering fees early in the project were paid in the amount of $116,000. This amount had not been encumbered.
(4) Architects were engaged at a fee of $250,000.
(5) Preliminary plans were approved, and the architects were paid 20 percent of the fee.
(6) The complete plans and specifications were received from the architects and approved. A liability in the amount of $150,000 to the architects was approved and paid.
(7) Bids were received and opened in public session. After considerable discussion in City Council, the low bid from Hardhat Construction Company in the amount of $4,500,000 was accepted, and a contract was signed.
(8) The contractor required partial payment of $1,350,000. Payment was approved and vouchered with the exception of a 5 percent retainage.
(9) Cash in the full amount of the grant was received from the state government.
(10) Furniture and equipment for the annex were ordered at a total cost of $439,500.
(11) Payment was made to the contractor for the amount payable (see 8 above).
(12) The contractor completed construction and requested payment of the balance due on the contract. After inspection of the work, the amount, including the past retainage, was approved for payment and then paid.
(13)The furniture and equipment were received at a total actual installed cost of $439,300. Invoices were approved for payment.
(14) The remainder of the architects’ fees was approved for payment.
(15) The City Jail Construction Fund paid all outstanding accounts payables ($489,300) on December 31, 2015.
(16) The remaining cash was transferred to the City Jail Debt Service Fund.
b. Post the entries to the City Jail Construction Fund general ledger.
c. Prepare and post an entry closing all nominal accounts to Fund Balance.
Explanation / Answer
b.
c.
Sl. No. Particulars Dr/Cr Debit Amount Credit Amount 1 Construction Fund Dr 4200000 8% Bonds Cr 4000000 Securities Premium Cr 200000 (Being 8% bonds issued at a premium) 2 State Government Grant Receivable Dr 1320000 Grant Cr 1320000 (Being amount of grant receivable from Government) 3 Legal Fees Dr 116000 Construction Fund Cr 116000 (Being legal fee paid) 4 Architect fee Dr 250000 Architect fee payable Cr 250000 (Being Architects hired and amount made payable to them) 5 Architect fee payable Dr 50000 Construction Fund Cr 50000 (Being 20% fee paid after approval of preliminary plans) 6 Architect fee payable Dr 150000 Construction Fund Cr 150000 (Being 60% of fee paid to architects after approval of complete plans) 7 Hardhat Construction Company Dr 1350000 Amount payable for construction Cr 1282500 Retention Amount Cr 67500 (Advance paid to construction company after retaining 5%) 8 Construction Fund Dr 1320000 State Government Grant Receivable Cr 1320000 (Being grant received from the government) 9 Amount payable for construction Dr 1282500 Construction Fund Cr 1282500 (Being amount paid to Hardhat as advance) 10 City Jail Building Dr 4500000 Hardhat Construction company Cr 4500000 (Being the building work completed and capitalized and amount made payable to builder) 11 Hardhat Construction Company Dr 3150000 Retention amount Dr 67500 Construction Fund Cr 3217500 (Being amount paid to the builder) 12 Interest on bonds Dr 160000 Construction Fund Cr 160000 (Being half yearly interest paid on bonds on July 1) 13 Furniture & Equipment Dr 489300 Furniture vendor Cr 489300 (Being furniture purchased and invoice approved) 14 Architect Fee payable Dr 50000 Construction Fund Cr 50000 (Being balance fee paid to architects) 15 Furniture vendor Dr 489300 Construction Fund Cr 489300 16 Interest on bonds Dr 160000 Interest payable Cr 160000 (Interest made payable as on Dec.31, 2015)