Problem
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 $5,000,000 on properties within Green Acres. The levies are payable in 10 equal annual installments, beginning in the current year, with 5 percent interest due on unpaid installments.
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.
3. On January 1, 2018, the first principal payment of $500,000 was made to bondholders as was interest on the debt.
What type of fund should the City of Foothills use to account for the special assessment debt?
Prepare journal entries for each of the foregoing events for the city. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field.)
1) Record the amount due to the special assessment bondholders.
2) Record the amount collected against assessment and interest payable.
3) Record the installment for 2018 reclassified as current.
4) Record the principal and interest paid to the bondholders.