On December 31, 2017 Morse City issued $50 million of 8 percent, 20-year, demand bonds that give bondholders the opportunity to "put" (i.e. sell) the securities back to the issuer at face value, beginning on January 1, 2018. On December 31, 2017, prevailing interest rates on comparable bonds were 6.7 percent. Should the city report the bonds as a liability on its December 31, 2017 governmental fund financial statements? Explain, indicating any additional information you would need to make a determination.

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The Answer of On December 31, 2017 Morse City issued $50 million of 8 percent, 20-year, demand bonds that give bondholders the opportunity to "put" (i.e. sell) the securities back to the issuer at face value, beginning on January 1, 2018. On December 31, 2017, prevailing interest rates on comparable bonds were 6.7 percent. Should the city report the bonds as a liability on its December 31, 2017 governmental fund financial statements? Explain, indicating any additional information you would need to make a determination.

On December 31, 2017 Morse City Issued $50 Million of 8