Practice Question 2

Question One

1. Assume that Borama City collects property taxes for its own purpose as well as
for the towns of Saylac and the total property tax levy for 2021 are as follows:

Borama City 800,000 86.96%

Saylac City 120,000 13.04%

Totals $920,000 100%

2. $480,000 of the tax levy is collected during the 1st quarter of 2021.
3. Borama City charges to Saylac City a fee of 6 percent of taxes collected.
4. Taxes collected were distributed to the respective governmental units.

Required: Prepare respective Journal entries for Borama and Saylac Cities?

Question Two

To illustrate accounting for capital project funds, assume the city of Berbera plans to
build $600,000 Bridge. The project will begin in 2018 and is to be completed in 2019.
The following are the events that occur during the construction of the bridge:

1. A $600,000, 6% general obligation bond issue and received a cash of $620,000.

2. The bond premium is transferred to the debt service fund.
3. A contract is signed for a construction company at an estimated cost of
$500,000.
4. A partial billing is received from the contractor for $450,000.
5. The contractor is paid.
6. Books for 2018 are closed
7. The encumbrances are reinstated at the beginning of 2019.
8. The additional construction contract is signed with the contractor at a cost of
$158,000.
9. The contract is completed in 2019.
10. The construction is accepted and the contractor is paid.
11. The residual balance is transferred to the debt service funds.
12. Books for 2019 are closed.

Instruction: Prepare Journal Entries?

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