Over the Course of One Year, Obed County Received Two $\underline{\text{Transactions: }}$

question 46

Essay

Over the course of one year, Obed County received two grants:
• $10,000 grant (in cash) to be used to finance half the cost of expanding the town's water treatment plant. All eligibility requirements are met once qualifying costs are incurred.
• $40 grant to educate users on water conservation measures and to monitor water usage by a study group. No cash was received upon notification of the award.

$\underline{\text{Transactions: }}$
1. Received the grant to assist in expanding the water treatment plant.
2. Signed a contract with Swann & Hall Construction to build the water treatment plant expansion, $20,000. The construction project is expected to take less than one year.
3. Received a $5,000 transfer from the General Fund to cover part of the cost of expanding the treatment plant.
4. Received an invoice from S&H Construction for $6,000,000 on the project for work completed to date. Paid the contractor the invoiced amount less a 10% retainage.
5. Received the grant to do the water study, but no cash was received in advance.
6. Issued $5,000 in bonds at mid-year at par to provide part of the financing for the treatment plant expansion. The bond issue costs were 1% of the face value. The bonds bear interest at 6%, payable semiannually on January 1 and July 1.
7. Received a second invoice for $10,000,000 on the project. Paid the contractor the invoiced amount less a 10% retainage.
8. Expenses incurred and paid during the year under this second grant total $30.
9. Received the final invoice from the contractor ($4,000,000). The expansion project was finished on-time and in accordance with the contract. Paid the contractor all amounts owed.
10. Make any necessary year-end adjusting entries.

$\underline{\text{ Requirements:}}$
1. Prepare the journal entries required in an Enterprise. If no entry is required, state "No entry required" and explain why.
2. How would these grants be reported in the statement of revenues, expenses, and changes in net position of the Enterprise Fund?
3. Assuming year-end had occurred after transaction #4, how would the grant and transfer affect the Statement of Net Position for the Enterprise Fund.

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