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On October 1, 2013, the City of Mizner issued $3,500,000 in 4%, general obligation bonds at 101 for the purpose of constructing an addition to City Hall. The premium was transferred to a debt service fund. A total of $3,475,000 was used to construct the addition, which was completed prior to June 30, 2014. The remaining funds were transferred to the debt service fund. The bonds were dated October 1, 2013, and paid interest on April 1 and October 1. The first of 20 annual principal payments of $175,000 is due October 1, 2014. The fiscal year for Mizner is July 1- June 30.
-In addition to a capital asset in the government-wide Statement of Net Assets,how would the construction costs of $3,475,000 be reported at year-end?

Question

Quizplus · Accepted Answer

The construction costs of $3,475,000 would be reported as an expenditure of the capital projects fund and a capital asset in the government-wide Statement of Net Assets. This is because the addition to City Hall is a capital project, and therefore the costs associated with it are recorded in the capital projects fund. However, the completed construction also represents a capital asset that will benefit the government for many years and should be reported in the government-wide Statement of Net Assets.

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