5–C. Part 1. Capital Projects FundTransactions The voters of the City of Monroe approved the issuance oftax-supported bonds in the face amount of $4,000,000 for theconstruction and equipping of a new City Jail. Architects were tobe retained, and construction was to be completed by outsidecontractors. In addition to the bond proceeds, a $1,340,000 grantwas expected from the state government. Required: a. Open a general journal forthe City Jail Annex Construction Fund. Record the followingtransactions and post to the general ledger. Control accounts arenot necessary. (1) On January 1, 2017, the total faceamount of bonds bearing an interest rate of 8 percent was sold at a$200,000 premium. Principal amounts of $200,000 each will come dueannually over a 20-year period commencing January 1, 2018. Interestpayment dates are July 1 and January 1. The first interest paymentwill be July 1, 2017. The premium was transferred to the City JailDebt Service Fund for the future payment of principal on thebonds. (2) The receivable from the stategovernment was recorded. (3) Legal and engineering fees earlyin the project were paid in the amount of $121,000. This amount hadnot been encumbered. (4) Architects were engaged (like acontract, record an encumbrance) at a fee of $250,000. (5) Preliminary plans were approved,and the architects were paid $50,000 (20 percent of the fee). (6) The complete plans andspecifications were received from the architects and approved. Aliability in the amount of $150,000 to the architects was approvedand paid. (7) Bids were received and opened inpublic session. After considerable discussion in City Council, thelow bid from Hardhat Construction Company in the amount of$4,500,000 was accepted, and a contract was signed. (8) The contractor required partialpayment of $1,350,000. Payment was approved and vouchered with theexception of a 5 percent retainage. (9) Cash in the full amount of thegrant was received from the state government. (10) Furniture and equipment for theannex were ordered at a total cost of $459,500. (11) Payment was made to thecontractor for the amount payable (see 8 above). (12) The contractor completedconstruction and requested payment of the balance due on thecontract. After inspection of the work, the amount, including thepast retainage, was approved for payment and then paid. (13)The furniture and equipment werereceived at a total actual installed cost of $459,300. Invoiceswere approved for payment. (14) The remainder of the architects’fees was approved for payment. (15) The City Jail Construction Fundpaid all outstanding accounts payables ($ 509,300) on December 31,2017. (16) The remaining cash wastransferred to the City Jail Debt Service Fund. b. Post the entries to theCity Jail Construction Fund general ledger. c. Prepare and post an entry closing all nominalaccounts to Fund Balance. 5–C. Part 2. Existing Debt Service FundTransactions The City Hall Debt Service Fund of the City of Monroe has beenopen for five years; it was created to service an $16,000,000, 3percent tax-supported bond issue. As of December 31, 2016, thisserial bond issue had a balance of $12,000,000. Semiannual interestpayments are made on January 1 and July 1, and a principal paymentof $400,000 is due on January 1 and July 1 of each year. As this is a regular serial bond debt service fund, the onlyaccounts with balances as of January 1, 2017, were Cash with FiscalAgent and Fund Balance—Assigned for Debt Service, each withbalances of $580,000. (Revenues were raised and collected in cashin 2016 in order to be able to pay bond principal and interest dueon January 1, 2017.) The government chose not to accrue interestpayable. Required: a. Open a general journal forthe City Hall Debt Service Fund and prepare journal entries for thefollowing transactions. Control accounts are not necessary (1) The fiscal agent reported that$180,000 in checks had been mailed to bondholders for interest dueon January 1, and $400,000 in checks were mailed for bonds maturingthat day. (2) Cash in the amount of $574,000 wasreceived from the General Fund on June 30 and was transferred tothe fiscal agent. (3) The fiscal agent reported thatchecks dated July 1 had been mailed to bondholders for interest of$ 174,000 due that day and $400,000 in checks were mailed for bondsmaturing that day. (4) Cash in the amount of $568,000 wasreceived from the General Fund on December 31 and transferred tothe fiscal agent to be used for the interest and principal due onJanuary 1 (next fiscal year). The government elected to not accruethe interest or principal at year-end. b. Post the entries to the City Hall Debt Service Fundledger (t-accounts). c. Prepare and post an entry closing all nominalaccounts to Fund Balance. 5–C. Part 3. New Debt Service FundTransactions On the advice of the city attorney, a City Jail Debt ServiceFund is opened to account for debt service transactions related tothe bond issue sold on January 1, 2017 (see Part 1). Required: a. Open a general journal forthe City Jail Debt Service Fund. Record the following transactions,as necessary. Control accounts are not necessary (1) The premium described intransaction 1 of Part 1 was received as a transfer from the capitalprojects fund. (2) Cash in the amount of $160,000 wasreceived from the General Fund on June 30 and was transferred tothe fiscal agent. (3) The fiscal agent reported thatchecks dated July 1 had been mailed to bondholders for interest duethat day. (4) The transfer described in partc of Part 1 was received. (5) Cash in the amount of $360,000 wasreceived from the General Fund on December 31 and transferred tothe fiscal agent to be used for interest and principal payments dueon January 1 (next fiscal year). The government elected to notaccrue the interest at year-end. (6) $ 200,000 of the remaining cash onhand was invested. b. Post the entries to the City Jail Debt Service Fundledger (t-accounts). c. Prepare and post an entry closing all nominalaccounts to Fund Balance. Assume any remaining net resources areclassified as Fund Balance – Assigned for Debt Service. 5–C. Part 4. GovernmentalFunds Financial Statements Required: a. Prepare a Balance Sheetfor the governmental funds for the City of Monroe as of December31, 2017. Include the General Fund, the Street and Highway Fund(P4–C), the City Hall Debt Service Fund, and the City Jail DebtService Fund. Use the balances computed in 4-C for the General Fundand special revenue fund portions of this statement. b. Prepare a Statement ofRevenues, Expenditures, and Changes in Fund Balances for thegovernmental funds for the City of Monroe for the Year EndedDecember 31, 2017. Include the same funds as listed in requirementa plus the City Jail Construction Fund. . . .
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