Over the Course of One Year, Obed County Received Two

question 8

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 have been met.
-$40 grant to educate users on water conservation measures and to monitor water usage by a study group.
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 30% of the project. Paid the contractor the invoiced amount less a 10% retainage.
5. Received the grant to do the water study.
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.
7. Received a second invoice for 50% of 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. 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.
Requirements:
1. Prepare the journal entries required in an Enterprise. If no entry is required, state "No entry required" and explain why.
2. Indicate the effects of each transaction on the accounting equation of the Enterprise Fund accounts. If an element of the equation is not affected or if the net effect is zero, put "NE" in the appropriate box.
3. How would these grants be reported in the statement of revenues, expenses, and changes in net position of the Enterprise Fund?
4. 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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Definitions:

Deprivation

A lack or denial of something considered to be a necessity, leading to adverse effects on physical or psychological well-being.

Homeostasis

The self-regulating process by which biological systems tend to maintain stability while adjusting to conditions that are optimal for survival.

Drive

An internal urge that motivates behavior towards fulfilling a need or achieving a goal.

Motivation Theorist

An individual who studies and develops concepts explaining why people are driven to meet certain needs or pursue particular goals.