The City of Abernathy, NY is a quiet town in upstate New York that is sixty miles east of Buffalo. The town operates a general fund, capital projects fund, debt service fund, and a special revenues fund. The fiscal year end is December 31. The City is about to begin the 2018 fiscal year (FY 2018) set to begin January 1, 2018 and ending December 31, 2018.

Instructions: For each question below, provide the journal entry(ies) for each selected transaction for the specific fund indicated. No subsidiary journal entries will be required.

During fiscal year (FY 2017), on October 1, 2017, the City of Abernathy’s capital projects fund issued $1,800,000 of 20-year serial bonds, bearing a 5% stated rate per year with interest payable on October 1st and April 1st of each fiscal year. In addition, each year on April 1, a principal redemption of $90,000 is paid to bondholders of record. The bond proceeds were used in late 2017 to partially finance the construction of a new building for a truck weight station that will be used to measure transport weight and cargo holdings for trucks on Interstate 95. The remaining monies are expected in February 2018 from the U.S. Department of Transportation as part of the federal stimulus legislation (The American Recovery and Reinvestment Act of 2009, P.L. 111-5) in the amount of $620,000, which will be received in the Special Revenues Fund and then transferred to the Capital Projects Fund. The total construction costs are estimated at $2,420,000 and will take less than five months to construct. The project commenced construction in FY 2018.

On April 1, 2017, prior to the serial bond issuance, Abernathy needed seed monies to initiate the construction of the weigh station and borrowed $100,000 of bond anticipation notes with an interest rate of 8.25%. These bond anticipation notes (BAN) were borrowed from J.P. Morgan Chase and were expected to be repaid in entirety, plus interest, with proceeds of the serial bonds issued later that year.

April 1, 2017. CAPITAL PROJECTS FUND. Record the issuance of the bond anticipation notes in the Capital Projects Fund:

April 1, 2017. Government-wide (Governmental Activities). Record the issuance of the bond anticipation notes at the government-wide level: 8

October 1, 2017. CAPITAL PROJECTS FUND. Record the issuance of the $1,800,000 serial bond proceeds in the Capital Projects Fund:

October 1, 2017. Government-wide (Governmental Activities). Record the issuance of the $1,800,000 serial bond proceeds at the government-wide level:

October 1, 2017. CAPITAL PROJECTS FUND. Record the repayment of the bond anticipation notes and interest in the Capital Projects Fund:

October 1, 2017. Government-wide (Governmental Activities). Record the repayment of the bond anticipation notes and interest at the government-wide level:

December 18, 2017. CAPITAL PROJECTS FUND. Purchase orders were placed in the amount of $77,000 to order supplies to begin the construction of the weigh station. Record the issuance of the purchase orders in the Capital Projects Fund:

December 31, 2017. Government-wide (Governmental Activities). Record the interest accrual for the serial bonds at the government-wide level: 9

DEBT SERVICES FUND. The serial bonds are to be serviced by the debt service fund. The bond interest and debt service is expected to be financed by property taxes. Below is the debt service fund trial balance at December 31, 2017, which consists of only $2,000 in cash:

Debit Credit Cash 2,000 $ Fund Balance–Restricted 2,000 $

January 1, 2018. DEBT SERVICES FUND. The budget is adopted by the debt service fund for the fiscal year. Appropriations of $177,750 equal two (2) bond interest expenditures for FY 2018 and one (1) principal reduction payment. Estimated revenues of $180,000 are from property taxes. Record the adoption of the budget in the Debt Services Fund:

CAPITAL PROJECTS FUND. Below is the post-closing trial balance at December 31, 2017 for the Capital Projects Fund. In FY 2018, there was minimal construction activity since the building permit was not issued until late December.

Debit Credit Cash 1,695,875 $ Fund Balance–Assigned 77,000 $ Fund Balance–Restricted 1,618,875

January 18, 2018. CAPITAL PROJECTS FUND. The outstanding orders (encumbrances) made at the end of FY 2017 that were estimated then to cost $77,000 for construction supplies were 100 % received on January 18, 2018 at an actual cost of $78,013. Journalize the necessary entry(ies) to record the receipt of goods in the capital projects fund: 10

January 20, 2018. CAPITAL PROJECTS FUND. Journalize the expenditure of the construction supplies and payment from the January 18th invoice in the capital projects fund:

January 20, 2018. Government-wide (Governmental Activities). Record the January 20th construction costs and payment at the government-wide level:

January 22, 2018. CAPITAL PROJECTS FUND. During late December, contract bids were submitted and on January 22nd, a contractor was hired for $2,420,000. Record the contract in the capital projects fund:

February 5, 2018. DEBT SERVICE FUND. Property taxes were assessed with the net tax levy estimated at $180,000; approximately 2 percent of the gross levy is estimated as uncollectible. The taxes are due on March 28, 2018. Journalize the assessment of the taxes in the Debt Service Fund: 11

February 15, 2018. SPECIAL REVENUES FUND. At the end of 2017, the U.S. Justice Department informed the City of Abernathy that it was going to receive $620,000 from the federal stimulus monies to be used as partial payment for the construction of the new police station. No journal entry was recorded in FY 2017. On February 15, 2018, the cash was received from the federal government and was recorded in the Special Revenues Fund. These funds deposited into the Special Revenues Fund will later be transferred to the Capital Projects Fund. Journalize the entry to the record the receipt of the stimulus funds from the federal government in the Special Revenues Fund:

February 28, 2018. SPECIAL REVENUES FUND. The federal grant monies received on February 15, 2018 are all transferred from the Special Revenues Fund to the Capital Projects Fund.

1. Journalize the transfer of the grant monies in the SPECIAL REVENUES FUND to the Capital Projects Fund:

2. Journalize the receipt of the grant monies in the CAPITAL PROJECTS FUND transferred from the Special Revenues Fund:

March 19, 2018. CAPITAL PROJECTS FUND. The contractor submitted an invoice requesting payment for 1/2 of the work that had been completed. Journalize the receipt and expenditure and liability of the invoice in the Capital Projects Fund:

1. Journalize the receipt of the invoice:

2. Journalize the expenditure and liability: 12

March 19, 2018. Government-wide (Governmental Activities). Journalize the March 19th invoice at the government-wide level:

March 21, 2018. CAPITAL PROJECTS FUND. Journalize the payment of the March 19th vouchers payable in the Capital Projects Fund:

March 28, 2018. DEBT SERVICE FUND. Actual tax collections totaled $176,500. Journalize the collection of the taxes in the Debt Service Fund:

March 29, 2018. DEBT SERVICE FUND. The remaining Taxes Receivable balance is delinquent. Journalize the entry to reclassify the current taxes to delinquent taxes in the Debt Service Fund:

April 1, 2018. DEBT SERVICE FUND. Journalize the required semi-annual interest payment and principal reduction in the Debt Service Fund: 13

April 1, 2018. Government-wide (Governmental Activities): Journalize the required semi-annual interest payment and principal reduction at the government-wide level:

August 12, 2018. CAPITAL PROJECTS FUND. The contractor submitted an invoice for the remainder of the construction work that was completed on August 10, 2018. Journalize the entries for the receipt and expenditure and liability of the invoice in the Capital Projects Fund:

1. Journalize the receipt of the invoice:

2. Journalize the expenditure and liability:

August 12, 2018. Government-wide (Governmental Activities). Journalize contractor’s final invoice at the government-wide level:

September 2, 2018. CAPITAL PROJECTS FUND. Only 80 percent of the final construction invoice submitted on August 10th was approved for payment and disbursed on September 2nd. Twenty percent of the final payment will be withheld as a retained percentage and disbursed after final inspections have been cleared. Journalize the payment and the retained percentage in the Capital Projects Fund: 14

September 15, 2018. GENERAL FUND. The City of Abernathy billed the Abernathy Water Utility, which is accounted for as an enterprise fund, for police, fire, and other governmental services provided in the amount of $45,000. Journalize the entry for the invoice billing in the General Fund:

September 23, 2018. Government-wide (Governmental Activities). The composition of construction costs of the building are listed below, which exceeded the budgeted construction costs. This was largely due to the contractor adding interest costs during the construction phase, which had never been journalized in the Capital Projects Fund or at the government-wide level. An occupancy certificate was issued on this date and the building was properly placed into service. Journalize the entry to place the building into service at the government-wide level:

Materials 1,100,000 $ Labor 1,120,000 Overhead Costs 200,000 Interest during construction 65,000 Total Construction Costs 2,485,000 $ 15

October 1, 2018. DEBT SERVICE FUND. Journalize the required semi-annual interest payment in the Debt Service Fund:

October 1, 2018. Government-wide (Governmental Activities): Journalize the required semi-annual interest payment at the government-wide level:

December 31, 2018. Government-wide (Governmental Activities). Record the adjusting entry at the government-wide level to journalize accrued interest at December 31, 2018: 16

December 31, 2018. DEBT SERVICES FUND. Below is the December 31, 2018 trial balance for the Debt Service Fund. Prepare the closing entries in proper form in the Debt Services Fund (NOTE: create a single closing entry—do not separate budgetary from other nominal funds):

Debit Credit Cash 750 $ Taxes Receivable–Delinquent 7,173 Estimated Uncollectible Del. Taxes 3,673 $ Fund Balance–Restricted 2,000 Expenditures–Interest 87,750 Expenditures–Bond Principal 90,000 Revenues–Property Taxes 180,000 Estimated Revenues 180,000 Appropriations 177,750 Budgetary Fund Balance 2,250 Totals 365,673 $ 365,673 $ 17

Problem III. (10 points possible).

Using the trial balance above, create a Statement of Revenues, Expenditures, and Changes in Fund Balance for the Debt Services Fund of the City of Abernathy, NY for the year ended, December 31, 2018.