Voters of Valley School District, a Public School District, Approved

Voters of Valley School District, a public school district, approved construction of a new high school at a cost not to exceed $20 million.The District will finance the construction by issuing $20 million of 6% term bonds payable in 20 years.Because the site had already been prepared, the School district began construction immediately but the bonds would not be issued for nearly a year.Shortly before the fiscal year-end, the School District borrowed $5 million from a local bank due in one year with interest at 6.2%.The note will be repaid from bond proceeds.The School District secured a financing agreement with the bank to convert the debt to a 10-year debt if the School District is unable to sell the bonds by the due date.At year-end, how should the $5 million note be displayed in the governmental fund financial statements?

A) Capital Projects Fund-Notes Payable $5 million; Nothing in the Schedule of Changes in Long-Term Obligations.
B) Capital Projects Fund-Notes Payable $5 million; $15 million in the Schedule of Changes in Long-Term Obligations.
C) Capital Projects Fund-Encumbrances of $5 million; $15 million in the Schedule of Changes in Long-Term Obligations.
D) Nothing in the Capital Projects Fund AND $5 million notes payable in the Schedule of Long-Term Obligations.