SEQ CHAPTER \H \R 1Prepare the General Journal Entries to Properly

question 10

Essay

SEQ CHAPTER \h \r 1Prepare the general journal entries to properly record each of the following transactions and events in the appropriate general ledger accounts of the appropriate funds for the year ended June 30, 2011. The City of Middlesettlements uses a series of each type of nominal account e.g., Revenues-Property Taxes, Revenues-Other, Expenditures-Operations, Expenditures-Capital Outlay, Expenditures-Debt Service-Interest, OFS-Bond Principal, OFU-Transfer to GF, etc., except for budgetary entries where no additional detail is required. The General Capital Assets and General Long-term Liability accounts are updated whenever a relevant transaction occurs.
ADDITIONAL INFORMATION:
? The fiscal year for the City is July 1 to June 30.
? All premiums on bonds payable, net of bond issue costs, are transferred to the DSF that will be used to service the debt. The amounts transferred are used for future bond interest payments.
? When bonds are issued at a discount or bond issue costs are incurred, a special transfer is made from the GF to the fund issuing the bonds to reimburse it for the discount and issue costs. This transfer is over and above any previously authorized transfers from the GF to that fund.
? The City uses the consumption method / periodic inventory system to account for supplies.
The City is constructing a new municipal building. Capital Projects Fund #1 will be used to account for this construction. The expected cost of and the sources of proportional financing for the municipal building are:
$\begin{array}{llr} \text {Bond issue authorized July 1, 2010,6\%,30-year serial bonds } &\$3,000\\ \text { State grant expenditure driven.} &1,500\\ \text { Transfer from the General Fund } &500\\ \text { Total sources and cost of building } &\$5,000\\ \text { All amounts are in thousands of dollars. } &\\\end{array}$

Transactions:
1. A computer has been leased for the City for its accounting and payroll operations. The lease has a fair market value and a net present value of $2,000. The lease will be serviced through the General Fund.
2. A contract for the construction of the new municipal building was accepted by Swann & Hall S&H Construction Company for $4,500. The required transfer from the General Fund to the Capital Projects Fund was made.
3. $400 in 6-month, 4%, bond anticipation notes BANs were issued to finance expenditures in advance of the bond issue. The BANs are to be repaid from the proceeds of the previously authorized bond issue-as required by the debt covenant-by CPF #1.
4. The City accounts for its supplies in the General Fund. The City started the year with $100 in its supply account and purchased $200 in supplies to augment its inventory.
5. The first capital lease payment on the computer, $150 including $100 in interest, was paid. See entry 1
6. 5 acres of land were purchased for $200 for the new municipal building. This purchase had not been previously encumbered, but it is included in the budget for the project.
7. The bonds authorized on July 1, 2010, were issued at 102 on October 1, 20X1. Bond issue costs were $20. The bonds pay interest on March 31 and September 30. Principal payments occur evenly over the life of the bonds each year 1/30 each September 30. DSF #1 was established to service this debt. See entries 3 & 8
8. The BANs were paid when due. See entries 3 and 7
9. The City issued $125 in supplies to its departments.
10. Expenditures totaling $2,500 were made for the construction project. These expenditures had originally been encumbered for $2,600. The amount was vouchered for payment to S&H Construction net of a 10% retainage. See entry 2
11. Sufficient funds were transferred from the General Fund to the DSF #1 to finance one year's principal retirement, interest, and fiscal agent fees $10 for the municipal building bonds. See entries 7 and 13
12. The City issued another $100 in supplies to its departments.
13. DSF #13 made the required March 31 bond payments. See entries 7 and 11
14. At year-end an inventory of supplies revealed that $80 were on hand. The appropriate adjustments were made.
Requirement: Prepare the general journal entries for the City of Middlesettlements, using standard fund-type terminology, identifying the fund or list for which the entry is being prepared. Appropriate abbreviations are acceptable e.g., GF, SRF, CPF, DSF, GCA, GLTL, OFS, OFU. If no entry is required, write "No Entry Required" and briefly explain why. Do not include formal entry explanations or dates, but include any important assumptions made and all calculations. If an amount is not given in the exam, you must show your work to demonstrate how you determined the amount.

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