ACC 415 – CHAPTER 18 HOMEWORK

Student: Khanh “Kai” Nguyen

ACC 415_Section 001
Student: Khanh “Kai” Nguyen Professor: Jenny Teruya

Questions: In fiscal 2019, the City of Victor plans to issue $9,000,000 face value, 5% general
obligation bonds to finance the expansion of the fire station plus equipment. Additional
financing will be obtained from a federal grant. Suppose the following transactions occurred in
each of the two years beginning October 1, 2018, and ending September 30, 2020.

Fiscal 2019:
October 10 The general fund advanced $500,000 to cover planning activities
October 15 $250,000 was spent for engineering and architectural work. The amount was
not previously encumbered.
October 30 The general obligation bonds were issued at a total price of $9,090,000. The
bonds mature on October 30, 2028, and interest is paid yearly. The bond
premium is legally restricted to be used for bond payments, and is accordingly
transferred to the debt service fund.
November 9 $800,000 of the federal grant proceeds was received
December 1 Contracts were signed with several construction and fire equipment companies
who will be responsible for various aspects of the project. All contracts provide
for a 10 percent retainage. The contracts totaled $9,600,000.
May 15 The advance from the general fund was repaid.
September 30 Extensive work was done on the fire station during fiscal 2019, and the
construction and equipment companies have submitted invoices in the amount
of $8,200,000. $7,000,000 in cash has been paid as of year-end.

Fiscal 2020:
October 2 $450,000 was transferred from the general fund to the debt service fund to cover
its interest expenditure for the year.
October 30 Interest was paid on the bonds.
January 12 The remainder of the federal grant was received by the capital projects fund,
$200,000.
June 15 Additional invoices totaling $1,400,000 were received, representing the final
billings of the contractors. $1,640,000 in cash was paid to contractors.
July 25 The fire station was accepted by the city. All contractors were paid in
fullo, and the remaining balance was transferred to the debt service fund to
finance future payments on the bonds

Assume all resources of the capital project fund are restricted; Debt service fund resources are
committed.

Required:
a) Prepare the journal entries, including closing entries, for the capital projects and debt
service funds for fiscal 2019 and 2020. Be sure to identify each journal entry with the
appropriate fund and correct date (you may add rows to the journals on the following
pages to prepare your entries for the two funds). Outstanding encumbrances are
accounted for using the non-lapsing method.
b) Prepare the balance sheet for the debt service fund on September 30, 2020.

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ACC 415_Section 001
Student: Khanh “Kai” Nguyen Professor: Jenny Teruya

ANSWER
Capital Projects Fund journal

Date Accounts Debit Credit

Oct 10, 19 Cash 500,000
OFS – Transfer in from general fund 500,000

Oct 15, 19 Encumbrances 250,000

BFB – assigned for Encumbrances 250,000

Oct 15, 19 Expenditures 250,000

Vouchers Payable 250,000

Oct 30, 19 Cash 9,090,000

OFS – Bond Issues 9,000,000
OFS – Bond Premium 90,000

Oct 30, 19 OFU – Transfer out to debt service fund 90,000

Cash 90,000

Nov 09, 19 Cash 800,000

Revenue – Federal Grant 800,000

Dec 01, 19 Encumbrances 9,600,000

BFB – Assigned for Encumbrances 9,600,000

May 15, 19 Expenditures 500,000

Cash 500,000

Sep 30, 19 BFB – Assigned for Encumbrances 8,200,000

Encumbrances 8,200,000

Sep 30, 19 Expenditures 8,200,000

Contract Payable 7,380,000
Contract Payable – Retained % 820,000

Sep 30, 19 Contract Payable 7,000,000

Cash 7,000,000

Jan 12, 20 Cash 200,000

Revenue – Federal Grant 200,000

Jun 15, 20 Expenditures 1,400,000

Vouchers Payable 1,400,000

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ACC 415_Section 001
Student: Khanh “Kai” Nguyen Professor: Jenny Teruya

June 15, 20 Contract Payable 380,000

Vouchers Payable 1,260,000
Cash 1,640,000

July 25, 20 Vouchers Payable 140,000

Contract Payable – Retained % 820,000
Cash 960,000

Sep 30, 20 OFS – Bond Issues 9,000,000

OFS – Bond Premium 90,000
Expenditures 10,350,000
OFS – transfer out to debt service 90,000
Fund Balance – unassigned 1,350,000

Sep 30, 20 OFS – transfer out to debt service 1,350,000

Cash 1,350,000

Sep 30, 20 Fund Balance – unassigned 1,350,000

OFS – transfer out to debt service 1,350,000

Sep 30, 20 BFB – Assigned for Encumbrances 1,650,000

Encumbrances 1,650,000

Sep 30, 20 Fund Balance – unassigned 1,650,000

Fund Balance – assigned for Encumbrances 1,650,000

Debt Service Fund journal

Date Accounts Debit Credit

Oct 30, 19 Cash 90,000
OFS – Transfer from Capital Projects 90,000

Oct 02, 20 Cash 450,000

OFS – Transfer in from general fund 450,000

Oct 30, 20 Expenditures – Interest 450,000

Matured Interest Payable 450,000

Oct 30, 20 Matured Interest Payable 450,000

Cash 450,000

July 25, 20 Cash 1,350,000

OFS – Transfer from Capital Projects 1,350,000

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ACC 415_Section 001
Student: Khanh “Kai” Nguyen Professor: Jenny Teruya

Sep 30, 20 OFS – Transfer from General Funds 450,000

Expenditures – Interest 450,000

Sep 30, 20 OFS – Transfer from Capital Projects 1,440,000

Fund Balance – assigned for Debt service 1,440,000

CITY OF VICTOR
Debt Service Fund
Balance Sheet
September 30, 2020
Assets:
Cash 1,440,000
Total Assets 1,440,000

Liabilities:
Fund Balance:
Spendable:
Assigned to:
Debt Service: 1,440,000
Committed
1,440,000
Total Liabilities and Fund Balance

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