Assessment Project Assignment Answers
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Special Assessment Project
After discussions with property owners residing on Bruce and Garrison Streets, the city council of Hobson City, Alabama authorized installation of street lights to better protect area citizens. Suppose total cost of the project is $3,300,000. Hobson City’s general fund will contribute $300,000 and 10-year term bonds will be issued to fund construction of the project. Hobson City can issue bonds paying 3 percent annually at par. The property owners will pay the city 10 equal annual installments, calculated as a 10-year annuity whose present value is the bond principal. Because each annual assessment exceeds the interest due on the bonds, the excess is invested at 3 percent to retire the principal.
Capital projects fund
| Description | Debit | Credit | |
|---|---|---|---|
| AnswerAdditionsAssessments receivableBond proceedsCashDeductionsExpenditures-interestInvestmentsRevenue from assessments | Answer | Answer | |
| AnswerAdditionsAssessments receivableBond proceedsCashDeductionsExpenditures-interestInvestmentsRevenue from assessments | Answer | Answer | |
| To record bond issuance. |
Debt service fund
| Description | Debit | Credit | |
|---|---|---|---|
| AnswerAdditionsAssessments receivableBond proceedsCashDeductionsExpenditures-interestInvestmentsRevenue from assessments | Answer | Answer | |
| AnswerAdditionsAssessments receivableBond proceedsCashDeductionsExpenditures-interestInvestmentsRevenue from assessments | Answer | Answer | |
| To record levy of special assessments. | |||
| AnswerAdditionsAssessments receivableBond proceedsCashDeductionsExpenditures-interestInvestmentsRevenue from assessments | Answer | Answer | |
| AnswerAdditionsAssessments receivableBond proceedsCashDeductionsExpenditures-interestInvestmentsRevenue from assessments | Answer | Answer | |
| To record collection of current assessments. | |||
| AnswerAdditionsAssessments receivableBond proceedsCashDeductionsExpenditures-interestInvestmentsRevenue from assessments | Answer | Answer | |
| AnswerAdditionsAssessments receivableBond proceedsCashDeductionsExpenditures-interestInvestmentsRevenue from assessments | Answer | Answer | |
| To record interest payment | |||
| AnswerAdditionsAssessments receivableBond proceedsCashDeductionsExpenditures-interestInvestmentsRevenue from assessments | Answer | Answer | |
| AnswerAdditionsAssessments receivableBond proceedsCashDeductionsExpenditures-interestInvestmentsRevenue from assessments | Answer | Answer | |
| To record investment of excess assessment amount. |
| Description | Debit | Credit | |
|---|---|---|---|
| AnswerAdditionsAssessments receivableBond proceedsCashDeductionsExpenditures-interestInvestmentsRevenue from assessments | Answer | Answer | |
| AnswerAdditionsAssessments receivableBond proceedsCashDeductionsExpenditures-interestInvestmentsRevenue from assessments | Answer | Answer | |
| To record bond issuance. |
| Description | Debit | Credit | |
|---|---|---|---|
| AnswerAdditionsAssessments receivableBond proceedsCashDeductionsExpenditures-interestInvestmentsRevenue from assessments | Answer | Answer | |
| AnswerAdditionsAssessments receivableBond proceedsCashDeductionsExpenditures-interestInvestmentsRevenue from assessments | Answer | Answer | |
| To record levy of special assessments. | |||
| AnswerAdditionsAssessments receivableBond proceedsCashDeductionsExpenditures-interestInvestmentsRevenue from assessments | Answer | Answer | |
| AnswerAdditionsAssessments receivableBond proceedsCashDeductionsExpenditures-interestInvestmentsRevenue from assessments | Answer | Answer | |
| To record collection of current assessments. | |||
| AnswerAdditionsAssessments receivableBond proceedsCashDeductionsExpenditures-interestInvestmentsRevenue from assessments | Answer | Answer | |
| AnswerAdditionsAssessments receivableBond proceedsCashDeductionsExpenditures-interestInvestmentsRevenue from assessments | Answer | Answer | |
| To record interest payment | |||
| AnswerAdditionsAssessments receivableBond proceedsCashDeductionsExpenditures-interestInvestmentsRevenue from assessments | Answer | Answer | |
| AnswerAdditionsAssessments receivableBond proceedsCashDeductionsExpenditures-interestInvestmentsRevenue from assessments | Answer | Answer | |
| To record investment of excess assessment amount. |
Assignment Help Answers with Step-by-Step Explanation:
PV = PMT/r (1 - 1/(1 + r)n)
Where:
We know the bond principal (PV) is $3,000,000, the interest rate (r) is 0.03, and the number of years (n) is 10. We need to find the annual payment (PMT).
Let's plug in these values:
3,000,000 = PMT/0.03 x 0.7441
Now, solve for PMT:
1. To record bond issuance:
Debit: Cash (Bond Proceeds) = $3,000,000
Credit: Revenue from Assessments = $3,000,000
3. To record collection of current assessments:
Debit: Cash = $9,000 (First Interest Payment)
Credit: Assessments Receivable = $9,000 (Reduction in Assessments Receivable)
Debit: Cash (Bond Proceeds) = $3,000,000
Credit: Bond Payable = $3,000,000
3. To record collection of current assessments:
Debit: Cash = $134,529.75 (First Assessment Collected)
Credit: Revenue from Assessments = $9,000 (Excess Assessment Investment Earnings)
The entries are the same as in part (b), except that in part (c), the bond liability is not recorded in the capital projects fund because the government has no liability for the bonds in this case, and the custodial fund is responsible for collecting and disbursing the assessment funds.
