E8-19 Special Assessment Debt [LO 8-4] The following information applies to the

Question

E8-19 Special Assessment Debt [LO 8-4] The following information applies to the questions displayed below Residents of Green Acres, a gated community located in the City of Foothills, voted to form a local improvement district to fund the construction of a neighborhood park. The city agreed to administer the bonded debt; however, residents of Green Acres are solely responsible for repaying the bond issue. The following events are related to the special assessment park debt: 1. On January 1, 2017, the city assessed levies totaling $6,600,000 on properties within Green Acres. The levies are payable in 10 equal annual installments, beginning in the current year, with 4 percent interest due on unpaid installments 3. ons reclassified as current A portion of asses December 31, 3. On January 1, 2018, the first principal payment of $660,000 was made to bondholders as was interest on 2. All assessments associated with the current year's installment were collected by December 31, 2017, as was the interest due on the unpaid installments. A portion of assessments receivable equal to the 2018 installment was reclassified as current. the debt.

Explanation / Answer

Journal Entry Transaction Account & Explanation Debit Credit 1 Assesment Receivable-Current ( $6600000/10) $660,000 Asseesment Receivable-Non Current $5,940,000 Due to Special Assessment- BondHolder Principal $6,600,000 (To Record Amount due to the Special Assessment Holder) 2a Cash $798,000 Assesment Receivable-Current $660,000 Due to Special Assessment- BondHolder Interest ($6600000*4%) $264,000 (To record amount collected against Assessment and interest) 2b Assesment Receivable-Current $660,000 Asseesment Receivable-Non Current $660,000 (To Record installment for 2018 reclassified as current) 3 Due to Special Assessment- BondHolder Principal $660,000 Due to Special Assessment- BondHolder Interest $264,000 Cash $924,000 (To Record Principal & Interest to Bondholder)

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