Special Assessment Debt
The City of Dayville has undertaken a sidewalk construction project. The project is being financed by the proceeds from the issue on July 1, 2012, of $500,000 of 7% special assessment debt. One quarter of the principal plus interest is payable on June 30 of each year beginning June 30, 2013. Property owners are assessed to provide the funds to pay the principal and interest on the debt.
The following transactions occurred during the period July 1, 2012, through June 30, 2013. The bonds for the construction of the sidewalks were issued at par value. The sidewalks were completed at a cost of $500,000. Property owners were assessed and billed for the first installment of principal and interest on the special assessment debt. Assessments for the first installment of principal and interest on the special assessment debt were collected and the June 30, 2013, payment of principal and interest on the special assessment debt was made.
Prepare all journal entries for the above transactions that are necessary in the funds of the City of Dayville assuming that. The City of Dayville has made a commitment to the holders of the special assessment debt to assure the timely and full payment of principal and interest on the appropriate due dates. The City of Dayville has not obligated itself in any manner on the special assessment debt that was issued for the construction of the sidewalks.