The Village constructed a lighting system in an older neighborhood, the cost of
ID: 2539306 • Letter: T
Question
The Village constructed a lighting system in an older neighborhood, the cost of which will be assessed to the residents benefitting from the system. The Village issued a note on July 1, 2016, with par value of $88,000 and an interest rate of 6.25% to fund construction (ignore capitalization of interest), with another $12,500 to be transferred from the General Fund. The residents are billed for $93,500 on July 1; receipts are collected and used to pay the debt and related interest on June 30, 2017, when construction is complete.
REQUIRED:
Prepare journal entries to record the above (include all necessary related entries EXCEPT closing and, for simplicity, assume use of cash for payments) in both the Fund-based and Government-wide financial statements. For Fund-based, designate the Fund; for Government-wide, designate the activity. If the entry is the same, you may write “same entry” for the second set of financials; if there is no entry, write “no entry.”
Explanation / Answer
Date
Particulars
Debit ($)
Credit ($)
01-07-16
Constructor
88000
Noyes payable
88000
(Being note issued to the constructor)
Constructor
12500
General fund
12500
(Being the amount issued from General Fund)
30-06-17
Lighting system
100500
Constructor
100500
(Being the lighting system construction is completed)
01-07-17
Notes payable
88000
Interest on notes payable
5500
Bank
93500
(Being the debt along with interest discharged)
Date
Particulars
Debit ($)
Credit ($)
01-07-16
Constructor
88000
Noyes payable
88000
(Being note issued to the constructor)
Constructor
12500
General fund
12500
(Being the amount issued from General Fund)
30-06-17
Lighting system
100500
Constructor
100500
(Being the lighting system construction is completed)
01-07-17
Notes payable
88000
Interest on notes payable
5500
Bank
93500
(Being the debt along with interest discharged)
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