Chp_6_Homework

Chp_6_Homework - Chapter 06 - Accounting for General...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: Chapter 06 - Accounting for General Long-term Liabilities and Debt Service CHAPTER 6: ACCOUNTING FOR GENERAL LONG-TERM LIABILITIES AND DEBT SERVICE Answers to Questions 6-1 General long-term liabilities arise from activities of the General Fund or some other governmental fund. These liabilities are distinguished from fund long-term liabilities that are incurred by a proprietary or fiduciary fund and for which debt service will be paid from that fund. General long-term liabilities are reported only in the Governmental Activities column of the government-wide financial statements and not in any fund. 6-2 As shown in Illustration 6-1 for the City and County of Denver, note disclosures about long-term debt (such as bonds, notes, and capital leases) and operating long-term liabilities (such as claims and judgments, compensated absences, and other accrued liabilities) should show the beginning balance of each major class of long-term liability and additions to, deletions from, and the ending balance of each major class. These disclosures should present separate sections for governmental activities and business-type activities. Presenting long-term liability disclosures for discretely presented component units, as the City and County of Denver has done, is discretionary and is a matter of professional judgment. 6-3 a . The fund receiving the benefit of the bond issue, such as a capital projects fund would record a debit to Cash and a credit to Other Financing SourcesProceeds of Bonds. Since premiums and accrued interest must be used to service the debt, the premium on the bond sale would be recorded in the debt service fund as a debit to Cash and a credit to Other Financing SourcesPremium on Bonds. At the government-wide level the debit would be to cash for the total amount (bond payable plus premium) with related credits to Bonds Payable and Premium on Bonds Payable. b . At the fund level the cash would be reported on the balance sheet and the accounts Proceeds of Bonds and Premium on Bonds would be reported on the statement of revenues, expenditures and changes in fund balance as other financing sources. At the government-wide level in the Governmental Activities column cash would be reported on the statement of net assets as would the bond. The account Bonds Payable would be classified as a long-term liability (except for the current portion, which is due within one year) and the Premium on Bonds Payable would increase (add to) the carrying value of the Bonds Payable. c. GASB requires that the effective interest method be used to amortize the Premium on Bonds Payable. As a result, the amortization of the premium reduces the carrying value of the bond by the amount of premium amortized each interest payment period. At the maturity of the bond the carrying value of the bond will be equal to the face value of the bond....
View Full Document

Page1 / 14

Chp_6_Homework - Chapter 06 - Accounting for General...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online