The city is installing curbs and sidewalks in a subdivision as part of a special assessment capital improvement project. The capital improvements are being financed by an $800,000 eight year, 10%, special assessment note payable issued for cash at the Last National Bank at the beginning of the project earlier this year. The note and interest are to be repaid from special assessments levied against the property owners of the subdivision. The total amount of special assessments of $840,000 was levied in the current year and will be collected evenly over eight years beginning next year. The city spent $600,000 to install curbs and sidewalks during the year. For the year, the city should report what change in fund balance for the Capital Projects Fund?

Question

Quizplus · Accepted Answer

The city should report a change in fund balance for the Capital Projects Fund of $200,000. This is calculated by subtracting the cost of the capital improvements ($600,000) from the proceeds of the note payable ($800,000). The special assessments levied do not affect the current year's fund balance since they will be collected over eight years.

The City Is Installing Curbs and Sidewalks in a Subdivision