Accounting For Capital Project Funds

Accounting for Capital Project
Funds
CAPITAL PROJECT FUNDS: ILLUSTRATION
Assume that late in 2013 the City Council of Addis Ababa City authorized an issue of
Birr1,200,000 of 8 percent 10-year regular serial tax- supported bonds to finance
construction of a fire station expansion.
The total cost of the fire station expansion was expected to be ETB2,000,000, with
ETB600,000 to be financed by grants from other governmental units and ETB200,000 to
be transferred from an enterprise fund of the City of Addis. The project would utilize
land already owned by the City and was to be done partly by a private contractor and
partly by the City’s own working force. Completion of the project was expected within
the year.
The following transactions were made by the City’s Capital project fund established for
the construction of the fire station addition.
1. The ETB 1,200,000 bond issue, which had received referendum approval by
taxpayers, was officially approved by the City Council.
2. The sum of ETB100,000 Bond Anticipation Notes Payable was issued to borrow
from Commercial Bank of Ethiopia for defraying engineering and other preliminary
costs incurred before bonds could be sold.
3. The receivables from the enterprise fund and the other governmental units were
recorded; receipt was expected during the current year.
4. Total purchase orders for supplies, materials, items of minor equipment, and
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contracted services required for the project amounted to ETB247,698.
5. A contract was issued for the major part of the work to be done by a private
contractor in the amount of ETB1,500,000.
6. Special engineering and miscellaneous preliminary costs that had not been
encumbered were paid in the amount of ETB97,500.
7. When the project was approximately half-finished, the contractor submitted billing
for a payment of ETB750,000. The project contract specifies 5% should be retained
for contingencies until completion and inspection against specification of the
construction.
8. The transfers were received from the enterprise fund in full, and the other
governmental units in half.
9. The bond issue was sold at a premium of ETB 12,000. The premium was ordered to
be transferred to the newly established Debt Service Fund.
10. The City of Addis’s Capital Projects Fund pays the bond anticipation notes and ETB
2,500 accrued interest.
11. The contractor’s initial claim was paid, less a 5 percent retention.
12. Disbursements for items ordered at an estimated cost of ETB217,000 amounted to
ETB 216,500.
13. Assume the contractor completes construction of the fire station and bills the City
for the balance on the contract
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14. Assume the amount remaining from other governmental units was received
15. Invoices for goods and services previously encumbered in the
amount of ETB30,698 were received and approved for
payment in the amount of ETB30,500. Additional construction
expenditures, not encumbered, amounted to ETB116,500. The
entire amount was paid in cash.
16. Final inspection revealed only minor imperfections in the
contractor’s performance, and upon correction of these, the
contractor’s bill and the amount previously retained were paid.
17. The cash remained in the capital projects fund was transferred
to a debt service fund for the payment of bonds and the Capital
project fund was closed.
Required: Make all the necessary entries in the books of the
Capital Project Fund and in the Governmental Activities.
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Capital Projects Fund Government Wide-Governmental Activities
1. No Entry [Memorandum Entry] 1. No Entry [Memorandum Entry]

2. Cash 100,000
2. Cash 100,000
Bond Anticipation 100,000
Payable
Bond Anticipation 100,000
3. Due from Enterprise Fund 200,000 Payable
Due from Other Gov Units 600,000 3. Due from Business Type 200,000
OFS-Transfers In 200,000
Due from Other Gov units 600,000
Revenues 600,000
4. Encumbrance 247,698 Transfer Revenues 800,000
BFB-Reserve for Encum. 247,698
4. No Entry
5. Encumbrance 1,500,000
BFB-Reserve for Encum 1,500,000 5. No Entry
6. Construction Expenditure 97,500
6. Const. Work in Progress 97,500
Cash 97,500
7. a) BFB-Reserve for Encum 750,000 Cash 97,500
Encumbrance 750,000
7.a) No entry
7.b) Construction Expenditure 750,000
Contracts Payable- 37,500 7.b) Const. Work in Progress 750,000
RP
Contracts Payable 712,500 Contracts Payable- 37,500
RP 5
112,500
8. Cash 500,000
8. Cash 500,000
Due from Business Type 200,000
Due from Enterprise 200,000
Due from other govs 300,000
Due from Other Govs 300,000
9.a) Cash 1,212,000
9.a) Cash 1,212,000
Bonds Payable 1,200,000
Other Fin. Sources 1,212,000
Bond Issue Premium 12,000
9.b) Equity Transfers Out 12,000
9.b) No Entry
Cash 12,000
10. Bond Anticipation Notes 100,000
10.Bond Anticipation Notes 100,000
Interest Expense 2,500
Interest Expenditure 2,500
Cash 102,500
Cash 102,500
11. Contracts Payable 712,500
11. Contracts Payable 712,500
Cash 712,500
Cash 712,500
12.a)No Entry
12.a) BFB-Reserve for Enc 217,000
12.b)Const. Work in Progress 216,000
Encumbrance 217,000
Cash 216,000
b) Construction Expend. 216,000
Cash 216,000 6
13.a) BFB-Reserve for Enc 250,000 13.a) No Entry
Encumbrance 250,000
13.b)Const. work in progress 750,000
13.b)Construction Exped 750,000
Contracts Payable- 37,500
Contracts Payable- 37,500
RP
RP 712,500
Contracts Payable Contracts Payable 712,500
14. Cash 300,000
14. Cash 300,000
Due form other Go 300,000
Due from OGU 300,000
15.a) [i] BFB-Reserve for Enc 30,696
15.a [i] No Entry
Encumbrance 30,696
15.a. [ii] Const. Work in prog 30,500
15.a) [ii] Const. Expenditure 30,500
Cash 30,500
Cash 30,500
15.b) Const. Work in prog 116,500
15.b) Const. Expenditure 116,500
Cash 116,500 Cash 16,500
16. Contracts Payable 712,500 16. Contract Payable 712,500
Contacts Payable –RP 75,000 Contract Payable-RP 75,000

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Cash 787,500 Cash 787,50
17.a) No Entry
17. a) Equity Transfer Out 36,500
17.b) Revenue 800,000
Cash 36,500
Interest Expense 2,500
17.b)Revenue 600,000
Income summary 797,500
17.b) Income Summary 797,500

Other Financing Source 1,412,000
Net Asset 797,500

Const. Expenditure 1,961,000
17.b)Building 1,961,000
Equity Transfer Out 48,500

Const. Work in Pr 1,961,000
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Accounting For Capital Project Funds

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Accounting for Capital Project

1. No Entry [Memorandum Entry] 1. No Entry [Memorandum Entry]

Cash 116,500 Cash 16,500

16. Contracts Payable 712,500 16. Contract Payable 712,500

Contacts Payable –RP 75,000 Contract Payable-RP 75,000

17.b) Revenue 800,000

17.b) Income Summary 797,500

Net Asset 797,500

Equity Transfer Out 48,500

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