The City of West Hutchison is constructing a new road, which it estimates will cost $7.2 million. The city will finance the road with an expenditure-driven state construction grant of $1.2 million and a bond issuance of $6 million. Prepare journal entries to record the following transactions and events for the city’s Capital Projects Fund during calendar year 2019. No budgetary entries other than encumbrances should be recorded.

1. The city receives $6.2 million from the bond issuance. The face amount of the bonds is $6 million.

2. The city signs a contract with the lowest bidder, Mary Michel Construction, to build the road at a cost of $7.2 million. 

3. The construction is complete and the city receives a bill from Mary Michel Construction for $7.1 million. A provision of the contract is that the city holds 15 percent retain age until the project is inspected and approved. 

4. The city pays the amount owed to the contractor less the retainage.

5. The city meets the spending provisions of the expenditure-driven construction grant and receives payment from the state.

6. The city inspector approves the construction project and the contractor is paid the retainage.

7. The city transfers the remaining cash balance to the Debt Service Fund.

Answer rating: 100% (QA)

Required solution The City of West Hutchison Journal entries for the year 2019 in Millions Year Acco... View the full answer