Prepare Journal Entries for the Following Related Transactions in the Fund

question 76

Essay

Prepare journal entries for the following related transactions in the fund and activity journals affected:
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.

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Definitions:

Historical Cost Principle

A fundamental accounting rule stating that assets must be logged and presented at the cost they were originally bought for.

Going Concern Principle

An accounting assumption that a company will continue operating and not go bankrupt or be liquidated in the foreseeable future.

Straight-Line Deprecation

A method of calculating the depreciation of an asset, dividing its cost by the number of years it is expected to be useful.

Book Value

The net value of a company's assets, found by deducting total liabilities and intangible assets from total assets.