The following transactions relate to the construction of a building by the Villa

Question

The following transactions relate to the construction of a building by the Village of Navajo Falls. The Village adopts a formal budget and uses encumbrance accounting. Prepare journal entries to record the following transactions in the Capital Projects Fund. 1. The Village Council adopts a capital budget at the beginning of the year. To finance construction      of the building, the Village will transfer $3 million from its General Fund and apply for a state grant      of $1 million. It appropriates $4 million for construction. 2. The General Fund transfers $3 million to the Capital Projects Fund for the new project. 3. Navajo Falls awards a construction contract in the amount of $3.4 million. 4. The contractor sends a progress billing to Navajo Falls in the amount of $1.6 million. The bill is      approved by the Village's engineers and a voucher is prepared, less a 10% retainage pending      completion of the building and final approval by the Village. 5. The contractor encounters construction problems due to unforeseen soil conditions. As a result,      Navajo Falls authorizes the cost increase of the construction contract by $200,000. 6. The voucher in 4, above, is paid. 7. Navajo Falls received $800,000 grant from the state for the building construction. 8. The contractor completes construction, and sends Navajo Falls an invoice for the remaining $2 million.      The Village's engineers inspect the building and accept the work. The invoice is approved and paid,      together with the amount retained on the progress billing in 4, above. JE Journal Entries Dollar Amounts Number Account Names (be sure to indent your credit accounts) Debit Credit The following transactions relate to the construction of a building by the Village of Navajo Falls. The Village adopts a formal budget and uses encumbrance accounting. Prepare journal entries to record the following transactions in the Capital Projects Fund. 1. The Village Council adopts a capital budget at the beginning of the year. To finance construction      of the building, the Village will transfer $3 million from its General Fund and apply for a state grant      of $1 million. It appropriates $4 million for construction. 2. The General Fund transfers $3 million to the Capital Projects Fund for the new project. 3. Navajo Falls awards a construction contract in the amount of $3.4 million. 4. The contractor sends a progress billing to Navajo Falls in the amount of $1.6 million. The bill is      approved by the Village's engineers and a voucher is prepared, less a 10% retainage pending      completion of the building and final approval by the Village. 5. The contractor encounters construction problems due to unforeseen soil conditions. As a result,      Navajo Falls authorizes the cost increase of the construction contract by $200,000. 6. The voucher in 4, above, is paid. 7. Navajo Falls received $800,000 grant from the state for the building construction. 8. The contractor completes construction, and sends Navajo Falls an invoice for the remaining $2 million.      The Village's engineers inspect the building and accept the work. The invoice is approved and paid,      together with the amount retained on the progress billing in 4, above. JE Journal Entries Dollar Amounts Number Account Names (be sure to indent your credit accounts) Debit Credit

Explanation / Answer

Journal Entry (Amount in million) Date Particulars Dr. Amt. Cr. Amt. 1 Estimated Other Financing Sources           3.00 Estimated Revenue           1.00    Appropriations           4.00 2 Cash           3.00    Tranfer in from General Fund           3.00 3 Encumbrances           3.40    Budgetary Fund Balance Reserved for Encumbrances           3.40 4-1 Budgetary Fund Balance Reserved for Encumbrances           1.60    Encumbrances           1.60 4-2 Expenditure - Construction Costs           1.60    Construction Contracts Payable           1.44    Retainage Payable           0.16 5 Encumbrances           0.20    Budgetary Fund Balance Reserved for Encumbrances           0.20 6 Construction Contracts Payable           1.44    Cash           1.44 7 Cash           0.80    Advance on Construction Grant           0.80 8-1 Budgetary Fund Balance Reserved for Encumbrances           2.00    Encumbrances           2.00 8-2 Expenditure - Construction Costs           2.00    Construction Contracts Payable           2.00 8-3 Construction Contracts Payable           2.00 Retainage Payable           0.16    Cash           2.16

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