The Town of Green River authorized a municipal building to be constructed at a cost of $175,000.

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Question:

The Town of Green River authorized a municipal building to be constructed at a cost of $175,000. The construction will be financed from the proceeds from the issue of $175,000 of 6% bonds. Any difference between the par-value of the bonds and the proceeds from their sale is transferred to the Debt Service Fund.

Transactions and events relating to this project include the following:

1. The proceeds from the sale of the bonds were received and included a premium on the bond issue in the amount of $15,000. The premium was transferred to Debt Service Fund.

2. Encumbrances were recorded on signing of the construction contract in the amount of $175,000.

3. Contract billings in the amount of $85,000 were approved for payment.

4. Contract billings were paid in the amount of $85,000.

5. All nominal accounts were closed and construction in progress was recorded in the appropriate account group in anticipation of the preparation of financial statements.

6. Encumbrances that were closed in anticipation of the preparation of financial statements are reestablished in the Capital Projects Fund.

7. Contract billings in the amount of $90,000 were approved on the completion of the municipal building.

8. Contract billings of $90,000 less a retention of 5% were paid.

9. The building was accepted, all construction liabilities were paid, and the building was recorded as an asset in the appropriate account group.

Required:

Prepare the journal entries relating to the Capital Projects Fund and the Debt Service Fund for the transactions and events described above. Clearly identify the fund in which each entry is recorded.