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Street Improvement Capital Projects Fund and Governmental Activities at the Government-wide Level

During late 2013, the voters of the City of Smithville authorized tax-supported bond issues totaling $10,000,000 as partial financing for a series of projects to construct streets, curbs, culverts, and storm sewers in various parts of the city. The estimated total cost of the series of projects, which are expected to extend over the next three years, was $11,200,000. In addition to the bond financing, voters also approved a special ½ cent sales tax to assist in financing the projects. The sales tax begins January 1, 2014 and will continue for two years. The sales tax is projected to generate $400,000 each year.

Required
Cash
Taxes Receivable—Sales
Vouchers Payable
Contracts Payable
Contracts Payable—Retained Percentage
Fund Balance—Restricted
Encumbrances Outstanding—Elm Street Project
Revenues
Other Financing Sources—Proceeds of Bonds
Construction Expenditures—Elm Street Project
Encumbrances—Elm Street Project

b. Record journal entries in the general journal of the Street Improvement Fund, as appropriate, for each of the following transactions. Remember to enter the correct year and paragraph numbers. Do not record entries at this time in other affected funds; those entries will be made in the later chapters of this cumulative problem that cover the affected funds. You should, however, make all required entries in the governmental activities general journal at the government-wide level.

1. [Para. 5-b-1] In early 2014, design plans and specifications for the first project, the “Elm Street Project,” were submitted by a construction engineering firm. The firm billed the Street Improvement Fund for $40,000.

Required: Record this billing and the related Vouchers Payable liability in the Street Improvement Fund and governmental activities journals. (Note: this transaction was not encumbered.)

2. [Para. 5-b-2] On April 15, 2014, construction bids were opened and analyzed. A bid of $2,000,000 was accepted, and the contract was awarded for the Elm Street Project. The contract provided for a retained percentage of 4 percent from each progress payment, and from the final payment, until final inspection and acceptance by the city’s public works inspectors.

Required: Record the signing of the contract in the Street Improvement Fund general journal. This transaction has no effect at the government world level.

3. [Para. 5-b-3] Vouchers payable (see Transaction 1) were paid on April 20, 2014.

Required: Record this transaction in both the Street Improvement Fund and governmental activities general journals.

4. [Para. 5-b-4] On May 6, 2014, 4% deferred serial bonds with a face value of $2,000,000 were sold for a total amount of $2,068,000, of which $28,000 was for accrued interest from January 1, 2014, date of bonds and $40,000 was a premium on the bonds sold. Cash in the amount of the accrued interest and premium was deposited directly in the Street Improvement Bond Debt Service Fund. Cash in the amount of $2,000,000 as deposited and recorded in the Street Improvement Fund.

Required: Record these transaction in the Street Improvement Fund and governmental activities general journals.

5. [Para. 5-b-5] In July 2014, the contractor for the Elm Street Project reported that the project was one-half completed and requested a progress payment of $1,000,000.

Required: Record the liability for the progress billing

6. [Para. 5-b-6] The billing for the partially completed Elm Street Project (see Transaction 5) was paid in late July, less the contractual retention
of 4 percent.

Required: Record this transaction in both the Street Improvement Fund and governmental activities general journals.

7. [Para. 5-b-7] In late November 2014 the Elm Street Project was completed and the contractor for the project requested a final payment of
$980,000. This amount was recorded as a liability,

Required: Record the liability for the final billing in both the Street Improvement Fund and governmental activities journals.

8. [Para. 5-b-8] Payment was made for the final billing on the Elm Street Project less the retained percentage, on December 1, 2014

Required: Record this transaction in both the Street Improvement Fund and governmental activities general journals.

9. [Para.5-b-9] Upon final inspection of the Elm Street Project, the city inspector determined that all work conformed to specification. Retained
percentages (Transaction 6 and 8) were paid to the contractor.

Required: Record this transaction in both the Street Improvement Fund and governmental activities journals. Total construction expenditures
for the Elm street Project should be capitalized in the infrastructure account in governmental activities.

10. [Para.5-b-10] During the year sales taxes were collected in the amount of $410,000

Required: Make the summary journal entries in both the Street Improvement Fund and governmental activities journals to record the collection of
sales taxes.

11. For the Elm Street Improvement Fund only, prepare year-end closing entries for 2014.