Beachfront property owners of the Town of Eden Beach requested a seawall be constructed to protect their beach. The seawall was financed through a note payable, which was to be repaid from taxes raised through a special assessment on their properties. The Town guarantees the debt and accounts for the special assessment through a debt service fund. Assume the special assessments were levied in 2019, recording a special assessment receivable and deferred inflow in the amount of $450,000. One-third of the assessment is to be collected each year and used to pay the interest and principal on the note.
Record the following transactions that occurred in 2020:
1. June 30, $150,000 of the assessments became due and currently receivable. (Hint: The special assessment tax is recorded as revenue in the debt service fund when it becomes due.)
2. July 31, the $150,000 was collected.
3. September 30, interest of $22,500 and principal of $127,500 were paid.
4. December 31, the books were closed.
