The City of Buffalo River had the following transactions related to the construction of a new courthouse.
(a) 1/1/04: The City of Buffalo River generated $5,000,000 for the Capital Projects Fund by selling bonds. Interest and principal payments are made on Jan. 1 and July 1 of each year by the Debt Service Fund.
(b) 3/1/04: Land is purchased by the Capital Projects Fund for a new courthouse at a cost of $212,000.
(c) 3/1/04: A contract is signed by the Capital Projects Fund for the construction of the new courthouse in the amount of $4,200,000.
(d) 7/1/04: Interest ($150,000) and principal ($125,000) are paid by the Debt Service Fund for obligations related to the bonds on behalf of the Capital Projects Fund.
(e) 12/1/04: The Capital Projects Fund paid an invoice for construction work completed to date on the courthouse construction project in the amount of $1,200,000.
Assumption: The Capital Projects Fund is separate and distinct from the Debt Service Fund. The Debt Service Fund makes interest and principal payments on behalf of the Capital Projects Fund. The Capital Projects Fund will only account for its own transactions.
Required:
(a). Prepare a Statement of Revenues, Expenditures and Changes in Fund Balance for the Capital Projects Fund. Assume this is the first year for the fund (beginning fund balances are zero) and the City has no other transactions other than those described above.
(b). Discuss the required disclosures for capital assets in a government's notes to the financial statements.