Question: Beachfront property owners of the Village of Eden requested a seawall be constructed to protect their beach. The seawall was financed through a note payable, which was to be repaid from taxes raised through a special assessment on their properties. The Village guarantees the debt and accounts for the special assessment through a debt service fund. Assume the special assessments were levied in 2011, recording a special assessment receivable and deferred revenue in the amount of $600,000. Onethird of the assessment is to be collected each year and used to pay the interest and principal on the note. Record the following transactions that occurred in 2012:
1. June 30, $200,000 of the assessments became due and currently receivable. (Hint: The special assessment tax is recorded as revenue in the debt service fund when it becomes due.)
2. July 31, the $200,000 were collected.
3. September 30, interest of $40,000 and principal of $160,000 were paid.
4. December 31, the books were closed.