A government defeased in-substance $10 million of old Enterprise Fund bonds by paying $12 million into a qualifying trust for that purpose. The refunded bonds had an unamortized premium of $200,000 and a prepaid bond insurance balance of $50,000. No borrowed resources were used to accomplish the defeasance. What amount of deferred interest expense adjustment should the government report?

Question

Quizplus · Accepted Answer

In this scenario, there is no need for a deferred interest expense adjustment because the government has fully provided for the old bonds' defeasance by paying into a qualifying trust. The transaction involves setting aside funds to ensure the bonds are effectively considered settled, and thus, there's no ongoing interest expense to adjust for.

A Government Defeased In-Substance $10 Million of Old Enterprise Fund