Question

The City of Waterville applied for a grant from the state government to build a pedestrian bridge over the river inside the city’s park. On May 1, the city was notified that it had been awarded a grant of up to $200,000 for the project. The state will provide re-imbursement for allowable expenditures. On May 5, the special revenue fund entered into a short-term loan with the General Fund for $200,000 so it could start bridge construction. During the year, the special revenue fund expended $165,000 for allowable bridge construction costs, for which it submitted documentation to the state. Re-imbursement was received from the state on December 13.

Required:
For the special revenue fund, provide the appropriate journal entries, if any, that would be made for the following. (Assume the city has a fiscal year-end of December 31).
1. May 1, 2017, notification of grant approval.
2. May 5, 2017, loan from General Fund.
3. During FY 2017, bridge expenditures and submission of re-imbursement documentation.
4. December 13, 2017, receipt of the grant re-imbursement funds.
5. December 31, 2017, adjusting and closing entries.

Answer 1

Answer and Explanation:

The Journal entries are shown below:-

1. No Journal entry is required as the eligibility should be completed before recognition.

2. Cash Dr, $200,000

To Inter fund Loans Payable-Current $200,000

(Being cash is recorded)

3. Expenditure Dr, $165,000

To Voucher Payable $165,000

(Being expenses is recorded)

Due from State Government Dr, $165,000

To Revenues $165,000

(Being revenues is recorded)

4. Cash Dr, $165,000

To Due from State Government $165,000

(Being cash is recorded)

5. Revenues Dr, $165,000

To Expenditure $165,000

(Being revenue is recorded)

No Other entry will made as the balance of $35,000 eligibility is not fulfilled.