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on \.gere Upon annexing a recently developed subdivision, a government undertakes to extend sewer lines to the area. Estimated cost is $10.0 million. The project is to be funded with $8.5 million in special assessment bonds and a $1.0 million reimbursement grant from the state. The balance is to be paid by the government out of its general fund. Property owners are to be assessed an amount sufficient to pay both principal and interest on the debt. During the year, the government engaged in the fol lowing transactions, all of which would be recorded in a capital projects fund. 1. It recorded the capital project fund budget. It estimated that it would earn $O.20 million in interest on the tem- porary investment of bond proceeds, an amount that will reduce the required transfer from the general fand. It es- timated that bond issue costs would be SO.18 million. It issued $8.5 million in bonds at a premium of $0.30 million and incurred $0.18 million in issue costs. The premium, net of issue costs, is to be transferred to a newly established debt service fund. It received the $1.0 million grant from the state, rec- ognizing it as deferred revenue until it incurred at least $1.0 million in construction costs. 2. 3. 4. It invested $7.62 million in short-term (less than one 5. It issued purchase orders and signed construction con- 6. It sold $5.0 million of its investments for $5.14 mil- year) securities. tracts for $9.2 million. lion, the excess of selling price over cost representing interest earned. By year-end the investments still orn hand had increased in value by S0.06 million, an amount also attributable to interest earned. 7. It received invoices totaling $S.7 million. As permitted by its agreement with its prime contractor, it retained (and recorded as a payable) $0.4 million pending satis- factory completion of the project. It paid the balance of $5.3 million. 8. It transferred $0.12 million to the debt service fund. 9. It updated its accounts, but did not close them inas- much as the project is not completed and its budget is for the entire project, not for a single period. a. Prepare appropriate journal entries for the capital projects fund

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