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On October 1, 2011, the City of Mizner issued $3,500,000 in 5%, general obligation bonds at 102 for the purpose of constructing an addition to City Hall. The premium was transferred to a debt service fund. A total of $3,450,000 was used to construct the addition, which was completed prior to June 30, 2012. The remaining funds were transferred to the debt service fund. The bonds were dated October 1, 2011, and paid interest on April 1 and October 1. The first of 20 annual principal payments of $175,000 is due October 1, 2012. 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 $3,450,000 be reported at year-end?

Question

Quizplus · Accepted Answer

The construction costs of $3,450,000 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 renovation project was funded by the issuance of bonds, which are long-term financing sources that result in the creation of a capital asset on the government-wide Statement of Net Assets. However, since the construction costs were initially paid for with funds from the capital projects fund, they would also be reported as an expenditure of that fund.

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