Problem:
With the approval of neighborhood property owners, the White City Council voted to construct sidewalks in a newly annexed neighborhood, assess the property owners for the cost, and issue debt to finance the project.
For the 2008 transactions that follow, prepare journal entries in White City's capital projects and debt service funds:
a. On January 1, 2008, the city council assessed the property owners the estimated cost of $8,000,000.
The assessments are payable over a five-year period ($1,600,000 per year) with interest at 6 percent annually (3 percent per semiannual period) on the unpaid balance. The first installment is due on December 31, 2008.
b. The city issued $8,000,000 of five-year, 6 percent, serial bonds. The bonds were issued at a premium
of $200,000, but the city incurred issuance costs of $150,000. It transferred the premium (net of the issuance costs) to the debt service fund.
c. It constructed the sidewalks at the estimated cost of $8,000,000.
d. It collected the first $1,600,000 installment of the assessments, along with $480,000 in interest.
e. It made one payment of $240,000 interest on the bonds. The next payment of interest, along with the first payment of $1,600,000 in principal, is due in January 2009.