Question

Prepare journal entries for the following related transactions in the fund and activity journals affected. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field.) 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. 2. The Parks and Recreation Special Revenue Fund transferred $250,000 for use in construction. 3. A construction contract was awarded in the amount of $5,200,000. 4. A bill was received from the contractor for $2,600,000. 5. The contractor’s bill is paid. 5% retainage is withheld. 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. 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.

Accounting

Answer 1

Que:
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.
Ans:
	Particulars	Dr.	Cr.
	Bank a/c	5050000
	To project fund (4% bonds) a/c		5000000
	To Security premium a/c		50000

Que:
2. The Parks and Recreation Special Revenue Fund transferred $250,000 for use in construction.
Ans:
	Particulars	Dr.	Cr.
	Profit & Loss a/c	250000
	To Special reserve fund a/c		250000

Que:
3. A construction contract was awarded in the amount of $5,200,000.
Ans:
No Journal entry

Que:
4. A bill was received from the contractor for $2,600,000.
Ans:
	Particulars	Dr.	Cr.
	Contractors a/c	2600000
	To Bills payable a/c		2600000

Que:
5. The contractor’s bill is paid. 5% retainage is withheld.
Ans:
	Particulars	Dr.	Cr.
	Bills payable a/c	2600000
	To Bank a/c		2470000
	To retained payments payable a/c		130000

Que:
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.
Ans:
S.No	Particulars	Dr.	Cr.
1	Building a/c	5000000
	Equipment a/c	200000
	To Contractors a/c		5200000
2	Contractors a/c	2600000
	Retained payments payable a/c	130000
	To Bank a/c		2730000

Que:
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.
Ans:
S.No	Particulars	Dr.	Cr.
1	Special reserve fund a/c	2500000
	Project fund a/c	2700000
	To Contract exp. payable a/c		5200000
2	Project fund a/c	2300000
	Security premium a/c	50000
	To Debt service fund a/c		2350000