White City had the attached transactions relating to a capital project for the fiscal year ending September
Question:
White City had the attached transactions relating to a capital project for the fiscal year ending September 30, 20X1.
WHITE CITY TRANSACTIONS FOR CITY HALL CONSTRUCTION FUND FOR FISCAL YEAR ENDING SEPTEMBER 30, 20X1 | |
(a) | White City Council approved the construction of a new city hall with a total cost of $100 million. The city then signed a contract with Colorful Constructors in the amount of $96 million, with a stipulation that 10% retainage is to be withheld from each progress payment until final acceptance of the building. The project is to be financed by a state grant of $30 million and a general obligation bond issue with a face value of$70 million. The city uses encumbrance accounting for its capital projects but does not incorporate the budget into the capital projects accounting records. |
(b) | The city issued the bonds for $71.5 million. The premium is to be used to repay principal on the bond through a debt service fund and will be recorded in that fund. |
(c) | A portion ofthe state grant was received in the amount of $20 million. The remainder of the grant will be received in the next fiscal year and does not need to be accrued or recorded. |
(d) | The city invested the state grant and the proceeds from the bond in a short term investment account until needed. As cash is needed for payments, the money will be transferred from these investments to the cash account. |
(e) | Paid the architects $50,000 for their work. This amount was not included in the contract with Colorful and has not been encumbered. The city liquidated this amount ofinvestments in order to pay the bill. |
(f) | Colorful submitted a progress billing in the amount of $20 million. |
(g) | The city liquidated investments with a principal amount of $18 million and investment earnings of $75,000. |
(h) | The progress payment to Colorful was made for the appropriate amount less the retainage. |
(i) | Another progress billing was submitted by Colorful in the amount of $30 million. |
(j) | The city received an additional $350,000 cash for earnings on the investments. This amount was deposited in the cash account ofthe fund. |
(k) | The market value of the investments at September 30, 20X1 was $72 million. |
(l) | Prepared closing entries for the fund at the end ofthe fiscal year. |
REQUIRED:
(1) Prepare general journal entries, in proper form, to record the attached transactions. Use the letter ofthe transaction as the date. Omit explanations.
(2) Prepare a balance sheet, in proper form, at September 30, 20X1 for White City’s City Hall Construction Fund.
Expert Answer:
i Journal Entries Date Journal Entries Debit Credit b Cash Ac Dr 71500000 To Bond 70000000 To Premium on bond issued 1500000 Being issue of Bond for a ... View the full answer
