Homework answers / question archive / Chapter 05   Accounting for General Capital Assets and Capital Projects   True / False Questions General capital assets should be distinguished from capital assets that are specifically associated with activities financed by proprietary and fiduciary funds, since capital assets acquired by proprietary and fiduciary funds are accounted for by those funds

Chapter 05   Accounting for General Capital Assets and Capital Projects   True / False Questions General capital assets should be distinguished from capital assets that are specifically associated with activities financed by proprietary and fiduciary funds, since capital assets acquired by proprietary and fiduciary funds are accounted for by those funds

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Chapter 05

 

Accounting for General Capital Assets and Capital Projects

 

True / False Questions

1. General capital assets should be distinguished from capital assets that are specifically associated with activities financed by proprietary and fiduciary funds, since capital assets acquired by proprietary and fiduciary funds are accounted for by those funds.  

 

True    False 

 

 

2. GASB standards require that all governmental expenditures for long-lived assets be accounted for by a capital projects fund.

 

True    False 

 

 

3. General capital assets purchased or constructed with governmental fund resources are recorded in the governmental activities general ledger at the government-wide level.    

 

True    False 

 

 

4. The disposal of a general capital asset, resulting in no revenue or expenditure to the government, is recorded only in the governmental activities accounts.

 

True    False 

 

 

5. Historical cost includes acquisition cost less any ancillary costs necessary to put the asset into use.  

 

True    False 

 

 

6. Depreciation of general capital assets for the period should be reported in the statement of activities at the government-wide level.

 

True    False 

 

 

 

7. GASB allows governments with a population below 100,000 to choose the modified approach, whereby they are not required to record depreciation on general capital assets.  

 

True    False 

 

 

8. Acquisition of a general capital asset represents an expenditure in a governmental fund, but requires capitalization of an asset at the government-wide level.

 

 True    False 

 

 

9. While the GASB encourages capitalization of all collections or individual works of art or historical treasures, governments can opt not to capitalize if certain conditions exist.

 

True    False 

 

 

10. General capital assets acquired under capital leases should not be recorded in the governmental activities accounts.  

 

True    False 

 

 

11. One of the required general capital asset disclosures is a schedule of the additions to, and deductions from, general capital assets during the course of a fiscal year.

 

True    False 

 

 

12. General capital assets acquired with capital projects fund resources would be recorded in essentially the same manner as if they had been acquired by the General Fund.

 

True    False 

 

 

13. Capital projects funds should use the modified accrual basis of accounting for revenues and expenses.  

 

True    False 

 

 

14. Capital projects funds generally do not use the Encumbrances control account.    

 

True    False 

 

15. In the capital projects fund general journal, Construction Work in Progress is the account used to capitalize the accumulated cost of partially-completed general capital assets.

 

True    False 

 

 

16. Intangible assets are defined by the GASB as capital assets that lack physical substance, have a useful life of more than one reporting period, and are nonfinancial in nature.

 

True    False 

 

 

17. Proceeds of debt issued for the construction or acquisition of capital assets are recognized by the capital projects fund as "other financing sources" and as a liability in the governmental activities journal.  

 

True    False 

 

 

18. It is common practice for a portion of contractor payments to be withheld in the capital projects fund until final inspection and acceptance of the asset under construction has occurred.

 

True    False 

 

 

19. The recorded premium on tax-supported bonds issued by a capital projects fund should be amortized at both the government-wide and fund levels.

 

True    False 

 

 

20. Interest incurred during construction of general capital assets cannot be capitalized as part of the cost of those assets.

 

True    False 

 

 

21. State laws often require that assets no longer needed in a capital projects fund be transferred to the fund that will service the debt incurred for the project, a debt service fund.  

  

True    False 

 

 

22. Streets, curbs, and sidewalks constructed or acquired through use of capital projects fund resources should never be reported in the financial statements of a government because they are for the use of the public, not for use by the government.   

 

True    False 

 

 

23. When a government experiences delays associated with a bond issuance, it is common practice to obtain temporary financing by use of bond anticipation notes.   

 

True    False 

 

 

24. The acquisition of long-lived assets under an operating lease does not require any asset recognition in the accounts of any governmental fund.  

 

True    False 

 

 

25. Water rights purchased by a city would be considered an intangible asset.    

 

True    False 

 

 

26. Capital projects funds differ from the General Fund and special revenue funds in that the latter categories have a year-to-year life, whereas capital projects funds have a projectlife focus. 

 

True    False 

 

 

27. If general capital assets are donated, revenue related to the donation is recognized in the governmental fund statement of revenue, expenditures and changes in fund balance.  

 

True    False 

 

28. General capital assets financed wholly or partially through collections of special assessments are recorded in the same manner as any other general capital assets in the governmental activities category at the government-wide level. 

 

True    False 

 

 

29. If all asset, liability, and fund equity accounts of a capital projects fund were closed during a certain fiscal year, it is unnecessary to prepare any financial statements for that fund for that year.  

 

True    False 

 

 

30. Under a service concession arrangement, a government transfers the rights and obligations of an asset to another legally separate governmental or private sector entity.  

 

True    False 

 

  

Multiple Choice Questions

 

31. Which of the following would be considered a general capital asset?  

 

1. 1. A vehicle purchased from General Fund revenues. 
   2. A vehicle purchased and maintained by an enterprise fund. 
   3. A computer purchased from revenues of an internal service fund and used by the supplies department. 
   4. Real estate purchased with the assets of a pension trust fund. 

 

 

32. Capital assets used by governmental funds should be reported in:   

 

1. 1. The appropriate governmental funds. 
   2. The property, plant, and equipment fund. 
   3. Departmental memorandum records. 
   4. The governmental activities column of the government-wide statements. 

  

33. GASB standards require that general capital assets be recorded in the fund statements at: 

 

1. 1. Historical cost. 
   2. Fair value at the financial statement date. 
   3. Estimated cost at the financial statement date
   4. None of the above. 

 

 

34. GASB standards require that general capital assets be recorded in the government-wide statements at: 

 

1. 1. Historical cost. 
   2. Fair value at the financial statement date. 
   3. Estimated cost at the financial statement date
   4. None of the above. 

 

 

35. The following items were included in Castle City's General Fund expenditures for the year ended June 

 

Personal computer for the city treasurer    $   6,000

Furniture for the mayor’s office                 $ 20,000

 

How much should be classified as capital assets in Castle City's General Fund balance sheet at June 30? 

 

1. 1. 1. $ 0. 
      2. $ 6,000. 
      3. $20,000. 
      4. $26,000.

  

36. The following items were included in Castle City's General Fund expenditures for the year ended June 

 

Personal computer for the city treasurer    $   6,000

Furniture for the mayor’s office                 $ 20,000

 

How much should be classified as capital assets in Castle City's government-wide statement of net position at June 30? 

 

1. 1. 1. $ 0. 
      2. $ 6,000. 
      3. $20,000. 
      4. $26,000.

 

 

37. During the year, a wealthy local merchant donated a building to the City of Rosewood. The original cost of the building was $300,000. Accumulated depreciation at the date of the gift amounted to $250,000. The appraised fair market value of the donation at the date of the gift was $600,000, of which $40,000 was the value of the land on which the building was situated. At what amount should this contribution be recorded in the governmental activities accounts at the government-wide level?  

 

1. 1. 1. $50,000. 
      2. $300,000. 
      3. $600,000. 
      4. $0. 

 

 

 

38. During the year, a wealthy local merchant donated a building to the city of Rosewood. The original cost of the building was $300,000. Accumulated depreciation at the date of the gift amounted to $250,000. The appraised fair market value of the donation at the date of the gift was $600,000, of which $40,000 was the value of the land on which the building was situated. At what amount should Rosewood record this donated property in the General Fund?  

 

1. 1. 1. $50,000. 
      2. $300,000. 
      3. $600,000. 
      4. $0. 

 

 

39. Which of the following is not a required disclosure about each major class of capital assets?   

 

1. 1. 1. Beginning-of-year and end-of-year balances showing accumulated depreciation separate from historical cost. 
      2. Capital acquisitions and sales or other dispositions during the year showing the date and method of acquisition or disposition. 
      3. Depreciation expense for the current period with disclosure of the amounts charged to each function in the statement of activities. 
      4. Disclosures describing works of art or historical treasures that are not capitalized and explaining why they are not capitalized. 

  

40. The City of Oak Park constructed a new storage facility using the city's own public works employees. Construction costs were incurred in the amount of $900,000, plus $25,000 in interest on short-term notes used to finance construction. What amount should be capitalized in the government-wide statements?  

 

A.  $900,000.  B.  $925,000. 

1. 1. 3. $875,000. 
      4. $0. 

 

 

        

41. The following general capital assets were owned by the Town of Otterville:

 

Town buildings                                          $3,250,000

Intangible assets                                           1,000,000

Streets, sidewalks, and water lines                   2,000,000

 

What amount should be recorded as capital assets in the town's governmental activities accounts?   

 

1. 1. 1. $0. 
      2. $3,250,000.  C.          $5,250,000. 

D.    $6,250,000. 

 

 

42. Equipment that had been acquired several years ago by a special revenue fund at a cost of $40,000 was sold for $15,000 cash. Accumulated depreciation of $30,000 existed at the time of the sale. The journal entry to be made in the governmental activities journal will include all of the following except:   

 

1. 1. 1. A debit to Cash for $15,000. 
      2. A debit to Accumulated Depreciation for $30,000. 
      3. A credit to Equipment for $40,000. 
      4. A credit to Other Financing Sources for $5,000. 

           

 

43. Equipment that had been acquired several years ago by a special revenue fund at a cost of $40,000 was sold for $15,000 cash. Accumulated depreciation of $30,000 existed at the time of the sale. The journal entry to be made in the special revenue fund will include:   

 

1. 1. 1. A debit to Cash for $15,000. 
      2. A debit to Accumulated Depreciation for $30,000. 
      3. A credit to Equipment for $40,000. 
      4. A credit to Other Financing Sources for $5,000. 

        

44. How should a capital lease for a general capital asset be recorded in the governmental activities accounts at the inception of the lease?   

 

1. 1. 1. Debit to a capital asset account. 
      2. Debit to a capital expense/expenditure account. 
      3. Credit to Capital Lease Obligations Payable. 
      4. Both A and C are correct. 

 

 

        

45. How should a capital lease for a general capital asset be recorded in the General Fund accounts at the inception of the lease?   

 

1. 1. 1. Debit to a capital asset account. 
      2. Debit to a capital expenditure account. 
      3. Credit to Capital Lease Obligations Payable. 
      4. Both A and C are correct. 

 

 

46. The City of Castle Rock issued bonds at par for the construction of a new city office building. Receipt of the bond proceeds would result in journal entries in which funds?   

 

1. 1. 1. Capital Projects Fund: Yes; Debt Service Fund: No 
      2. Capital Projects Fund: No; Debt Service Fund: Yes 
      3. Capital Projects Fund: Yes; Debt Service Fund: Yes 
      4. Capital Projects Fund: No; Debt Service Fund: No 

 

 

47. A government enters into a capital lease for the purchase of a new snow plow. The present value of the future lease payments is $845,500 and there is a down payment at the inception of the lease of $25,000. The snow plow should be recorded in the General Fund at:   

 

1. 1. 1. $  25,000. 
      2. $870,500. 
      3. $845,500. 
      4. $0. 

 

48. A government enters into a capital lease for the purchase of a new snow plow. The present value of the future lease payments is $845,500 and there is a down payment at the inception of the lease of $25,000. The snow plow should be recorded in the government-wide statement of net position:   

 

1. 1. 1. $  25,000. 
      2. $870,500. 
      3. $845,500. 
      4. $0. 

 

        

49. Which of the following statements is correct regarding depreciation?   

 

1. 1. 1. 1. Depreciation expense should be recorded in the appropriate governmental funds, and recorded in the governmental activities accounts. 
         2. Depreciation expense must be recorded in the governmental fund, but no depreciation expense is recorded in the governmental activities accounts. 
         3. No depreciation can be recorded in any governmental fund, but depreciation expense must be recorded in the governmental activities accounts. 
         4. No depreciation can be recorded in any governmental fund, nor is it permissible to record depreciation expense in the governmental activities accounts. 

 

 

50. Four new computers, for which the cost exceeded the city’s capitalization threshold, were purchased for use in the city clerk’s office using General Fund resources. Which of the following entries would be required to completely record this transaction?

 

A. General Fund:

Expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,000

Vouchers Payable . . . . . . . . . . . . . . . . . . . . . . . . 8,000 B. Governmental Activities:

Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,000

Vouchers Payable . . . . . . . . . . . . . . . . . . . . . . . . 8,000

1. 1. 3. General Fund:

Expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,000

Vouchers Payable . . . . . . . . . . . . . . . . . . . . . . . . 8,000       Governmental Activities:

Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,000

Vouchers Payable . . . . . . . . . . . . . . . . . . . . . . . . 8,000

1. 1. 4. General Fund:

Expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,000

Vouchers Payable . . . . . . . . . . . . . . . . . . . . . . . . 8,000      Governmental Activities:

Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,000

Vouchers Payable . . . . . . . . . . . . . . . . . . . . . . . . 8,000

 

 

51. A capital projects fund might be used to account for which of the following activities?  

 

1. 1. 1. Maintaining sidewalks. 
      2. Building a parking garage. 
      3. Providing water and sewer services. 
      4. Servicing long-term debt. 

 

        

52. Which of the following is true regarding capital projects funds?  

 

1. 1. 1. Encumbrances accounting is employed. 
      2. Encumbrances accounting is not normally employed, but Appropriations are recorded. 
      3. No budgetary accounts are ever used. 
      4. All budgetary accounts are employed and budget to actual statements are prepared. 

 

 

53. In 2017, Sunrise City signed a contract in the amount of $8,000,000 for the construction of a new city hall. Expenditures were $4,000,000 in 2017 and $2,050,000 in 2018, which included a change to the original construction design in the amount of $50,000. What amount should be added to capital assets in the governmental activities accounts in 2018?   

 

1. 1. 1. $              0 
      2. $      50,000  C.          $ 2,050,000 

D.    $ 2,000,000 

 

 

54. To offset engineering and design costs incurred prior to the issuance of a long-term bond issue, a capital projects fund borrowed the sum of $75,000 on a short-term basis from First National Bank. This transaction should be recorded in:   

 

1. 1. 1. The capital projects fund. 
      2. The debt service fund. 
      3. The special revenue fund. 
      4. None of the above.  Debt is not recorded in governmental funds. 

 

 

55. Transfers from the General Fund to the capital projects fund to provide partial financing of a capital project would be reported by the capital projects fund as a(an):  

 

1. 1. 1. Fund balance addition. 
      2. Revenue. 
      3. Other financing source. 
      4. Current liability. 

 

 

        

56. Which of the following statements is correct concerning interest expenditures incurred during the period of construction of capital projects?   

 

1. 1. 1. Interest expenditures may not be capitalized as part of the cost of general capital assets reported in governmental activities. 
      2. Interest expenditures may be capitalized as part of the cost of general capital assets reported in the governmental activities accounts at the government-wide level. 
      3. Interest expenditures must be capitalized as part of the cost of general capital assets reported in the capital projects fund. 
      4. The capitalization of interest expenditures as part of the cost of general capital assets reported in the capital projects fund is optional. 

 

 

57. When part of a progress payment for construction is withheld until final settlement of the contract, what account is credited?  

 

1. 1. 1. Encumbrances. 
      2. Appropriations. 
      3. Contracts Payable—Retained Percentage. 
      4. Construction Expenditures. 

 

 

58. The following balances are included in the subsidiary records of Carrollwood:

 

Town hall building . . . . . . . . . . . . . . . . . . . .        $500,000 

Town pool (supported by user fees) . . . . . .           100,000 

Police cars . . . . . . . . . . . . . . . . . . . . . . . . . .             20,000

Equipment . . . . . . . . . . . . . . . . . . . . . . . . . .               7,500

Office supplies . . . . . . . . . . . . . . . . . . . . . . .              1,000 

What is the total amount of general capital assets held by the town?

 

1. 1. 1. $527,500. 
      2. $528,500. 
      3. $627,500.
      4. $628,500.

 

 

59. Which of the following activities or transactions would normally not be accounted for in a capital projects fund?  

 

1. 1. 1. Construction of a new city jail.
      2. Construction of airport runways financed by revenue bonds and to be repaid from the revenues of the city airport, an enterprise fund.
      3. Lease of a building to be used as a city office building.
      4. Construction of a new city park to be maintained primarily from General Fund revenues.

 

60. A city recorded an asset impairment to a Public Works facility. Which of the following is correct concerning the recording of the amount of the asset impairment? 

 

1. 1. 1. The General Fund would record a debit to Expenditures.
      2. The General Fund would record a debit to Other Financing Uses—Loss due to Impairment.
      3. The governmental activities accounts would record a debit to Loss due to Impairment.
      4. The governmental activities accounts would record a debit to Expenses—Public Works.

 

 

61. A government experienced significant loss of certain roadways and bridges as a result of major flooding. Which of the following estimation approaches would be most useful in estimating the amount of asset impairment that has occurred?

 

1. 1. 1. Deflated depreciated replacement cost approach.
      2. Service units approach.
      3. Restorative cost approach.
      4. None of the above; each of these three approaches would be equally useful.

 

 

62. Premiums received on tax-supported bonds are generally transferred to what fund? 

 

1. 1. 1. Internal service fund.
      2. Debt service.
      3. General.
      4. Special revenue.

 

 

63. Governments can opt not to capitalize collections or individual works of art or historical treasures if the collection is:

 

1. 1. 1. 1. Held for public exhibition, education, or research in furtherance of public service           rather than for financial gain.
         2. Protected, kept unencumbered, cared for, and preserved.
         3. Subject to an organizational policy that requires the proceeds from sales of collection           items to be used to acquire other items for collections.      D. All of the above.

 

 

64. Which of the following is not true for capital projects funds?  

 

1. 1. 1. Capital projects funds use a Construction Work in Progress account to record costs until the project is completed. 
      2. Encumbrance accounting is generally used. 
      3. Capital projects funds use the modified accrual basis of accounting. 
      4. Capital projects funds have a project-life focus. 

 

65. In late April, the Acme Construction Co. submitted a $1,200,000 progress billing on a construction contract. On May 2, the bill was approved for payment, subject to a ten percent retention, as provided by the contract. Construction expenditures should be debited when:   

 

1. 1. 1. The bill is approved for payment. 
      2. The contract is signed.
      3. The bill is paid (except for the ten percent retention). 
      4. The final ten percent of the bill is paid. 

 

 

66. In late April, the Acme Construction Co. submitted a $1,200,000 progress billing on a construction contract. On May 2, the bill was approved for payment, subject to a ten percent retention, as provided by the contract. The amount that should be debited to Construction Expenditures is:   

 

1. 1. 1. $              0. 
      2. $     12,000. 
      3. $1,080,000.  D.  $1,200,000. 

 

 

67. At the inception of a capital lease for equipment the journal entry required in the capital projects fund will include which of the following?   

 

1. 1. 1. A debit to Equipment. 
      2. A debit to Capital Lease Expense. 
      3. A credit to Obligations under Capital Leases. 
      4. A credit to Other Financing Uses—Capital Leases. 

 

 

68. Which of the following is not a requirement that must be met to elect the "modified approach" to reporting certain eligible infrastructure assets?  

 

1. 1. 1. The government gets the permission of the Government Accounting Standards Board.  
      2. The government documents that the eligible infrastructure assets are being preserved approximately at (or above) the condition level established and disclosed. 
      3. The government manages the assets using an asset management system that includes condition assessments of the assets and summary of results using a measurement scale. 
      4. The government manages the assets using an asset management system that includes estimates each year of the annual amount needed to maintain and preserve the eligible assets at the condition level established and disclosed by the government.

        

 

        

69. When a snowplow purchased by a government is received, it should be recorded in the governmental activities general journal as a(an):   

 

1. 1. 1. Expenditure. 
      2. Capital asset. 
      3. Appropriation. 
      4. Expense. 

 

 

70. A general capital asset constructed several years ago by a capital projects fund was sold by the General Fund. Entries are necessary in the:   

 

1. 1. 1. General Fund only. 
      2. General Fund and the capital projects fund. 
      3. General Fund and governmental activities. 
      4. Governmental activities only. 

 

 

71. In which of the following would it not be appropriate to record depreciation of capital assets?   

 

1. 1. 1. Capital projects fund. 
      2. Internal service fund. 
      3. Business-type activities. 
      4. Governmental activities. 

 

 

72. The Town of Golden purchased a squad car for the police department. If the operations of the police department are financed by general revenues, which of the following is correct concerning where the capital asset would be recorded?   

 

1. 1. 1. General Fund: No; Governmental Activities: Yes 
      2. General Fund: No; Governmental Activities: No 
      3. General Fund: Yes; Governmental Activities: No 
      4. General Fund: Yes; Governmental Activities: Yes 

           

 

73. Which of the following statements regarding capital assets is not true?

 

1. 1. 1. Proprietary funds routinely account for capital assets used in their operations within the      fund financial statements.
      2. Fiduciary funds do not account for property, plant, and equipment within the fund      financial statements.
      3. Because governmental funds account only for current financial resources, these funds do       not record capital assets acquired by the funds.
      4. General capital assets purchased or constructed with governmental fund resources are       recorded in the governmental activities general ledger at the government-wide level.

 

 

74. When a government transfers the rights and obligations of an asset to another legally separate governmental or private sector entity, the transaction is referred to as: 

 

1. 1. 1. A capital lease. 
      2. An operating lease. 
      3. A service concession arrangement. 
      4. A sale-leaseback agreement. 

           

 

75. Under a service concession arrangement,  

 

1. 1. 1. The transferring government continues to report the transferred asset as a capital asset and any related contractual obligations as liabilities. 
      2. The operating government will record the transferring government’s payment or receivable, a liability for the present value of significant contractual obligations and a corresponding deferred inflow of resources for the difference between the two. 
      3. Any deferred inflow of resources is recognized as revenue at the time the arrangement takes place. 
      4. All of the above statements are true. 

 

 

 

       

Short Answer Questions

 

 

76. The following key terms from Chapter 5 relate to general capital assets and capital projects:

 

1. 1. 1. Bond anticipation notes
      2. Infrastructure assets
      3. Service Concession Arrangements
      4. General capital assets
      5. Capital projects funds
      6. Asset impairment
      7. Capital leases
      8. Operating leases
      1. Depreciation

 

 For each of the following definitions, indicate the key term from the list above that best matches the definition by placing the appropriate letter in the blank space next to the definition.

 

 _____ 1.   A rental-type lease in which the risks and benefits of ownership are primarily those of the lessor

 _____ 2.  Short-term interest-bearing instruments issued by a government with a plan to replace with longer-term debt

 _____ 3.  Roads, bridges, curbs and gutters, streets, sidewalks, and drainage systems installed for the common good

 _____ 4.  Capital assets of a government that are not recorded in a proprietary or fiduciary fund

 _____ 5.  Significant, unexpected decline in the service utility of a capital asset  

 

 

77.       (Fill in the blank.) If a city’s General Fund acquires a new copier under a capital lease agreement,

 

1. 1. The cost of the copier should be recorded in the ____________ general journal(s).
   2. The "cost" of the copier is computed as _______________.
   3. A governmental fund should record the cost of the copier as an Expenditure, offset by a credit to _______________.
   4. The liability for the capital lease should be recorded in the __________ general journal(s).
   5. The liability should be computed as _______________.  

 

81. What is the difference between using the modified approach to accounting for infrastructure   assets and depreciating infrastructure assets? 

 

 

82. Under the modified approach, what happens if infrastructure assets are not maintained at or above the established condition level?

 

 

 

83. If bonds are sold at a premium to finance a capital project, what important question arises concerning the premium? Discuss the proper accounting for a bond premium in the capital projects fund, the debt service fund, and the government-wide statements assuming that the premium must be reserved for debt service.

 

 

84. Which expenditures of a capital projects fund should be capitalized to Construction Work in Progress? Is Construction Work in Progress included in the chart of accounts of a capital projects fund? If not, where would it be found?

 

 

 Problems

 

 

85. The City of McNeely sold bonds in the amount of $25,000,000 to finance the construction of a public health center. The bonds are serial bonds and were sold at par on July 1, 2017 the first day of a fiscal year. Shortly thereafter a construction contract in the amount of

$22,000,000 was signed and the contractor commenced work. By year-end the contractor had been paid in full for all billings to date amounting to $12,000,000. 

 

Prepare, in general journal form, all journal entries that should have been made during the fiscal year ended June 30, 2018 to record the preceding information in the capital projects fund. (No closing entry is required).  

 

 

 

        

86. Prepare journal entries for the following related transactions in the fund and activity journals affected:

 

1. 1. 1. A capital projects fund issued $5,000,000, 4 percent bonds for $5,050,000 to finance improvements of a park.  Premiums received are to be used to service the debt issue.

 

1. 1. 2. The Parks and Recreation Special Revenue Fund transferred $250,000 for use in construction.

 

1. 1. 3. A construction contract was awarded in the amount of $5,200,000.

 

1. 1. 4. A bill was received from the contractor for $2,600,000.  

 

1. 1. 5. The contractor’s bill is paid.  5% retainage is withheld.

 

1. 1. 6. The park renovations were completed and the final bill of $2,600,000 was received.  The contractor’s bill and retainages are approved for payment in full. Total construction expenditures were allocated as follows: $5,000,000 to building, and the remainder to equipment.

 

1. 1. 7. The capital projects fund temporary accounts were closed, and the capital projects fund was closed by transferring remaining funds to the debt service fund for use in debt repayment.