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3 August, 11:12

The City of West Hutchison is constructing a new road, which it estimates will cost $7.2 million. The city will finance the road with an expenditure-driven state construction grant of $1.2 million and a bond issuance of $6 million. Prepare journal entries to record the following transactions and events for the city's Capital Projects Fund during calendar year 2019. No budgetary entries other than encumbrances

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  1. 3 August, 14:34
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    1.

    Budgetary fund balance reserved for encumbrances (DR) $7,200,000

    Encumbrances-Capital Project (CR) $7,200,000

    2.

    Cash (DR) $1,200,000

    Government Grant (CR) $1,200,000

    3.

    Cash (DR) $6,000,000

    Bonds Payable (CR) $6,000,000

    Explanation:

    1. The Budgetary entry for encumbrance is given as follows:

    Budgetary fund balance reserved for encumbrances (DR) $7,200,000

    Encumbrances-Capital Project (CR) $7,200,000

    2. The government grant received will be recorded as:

    Cash (DR) $1,200,000

    Government Grant (CR) $1,200,000

    3. The Issuance of Bonds needs to be recorded in the journal ledger as:

    Cash (DR) $6,000,000

    Bonds Payable (CR) $6,000,000
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