Question: A school district constructs a new elementary school at a

A school district constructs a new elementary school at a cost of $24 million. It finances the project by issuing 30-year general obligation serial bonds, payable evenly over the outstanding term ($800,000 per year). District officials estimate that the school will have a useful life of 30 years (with no residual value).
1. Prepare summary entries, in a capital projects fund, to record the issuance of the bonds and construction of the school.
2. Assume that the district repays the bonds out of current revenues. Prepare the entry that it would make each year in its general fund to record the bond principal payments.
3. Assume that the school district must balance its budget; all general-fund expenditures must be covered by general-fund tax and other revenues. A member of the district’s board of trustees pointed out that, owing to an unanticipated increase in property values, the district enjoyed a budget surplus in the previous two years and consequently had accumulated $4 million in ‘‘savings.’’ its government-wide statements. Suppose that the district were required to balance its budget; expenditures could not exceed revenues. With respect to expenditures relating to the new building, would it matter whether the expenditures were measured on a full or a modified accrual basis? Would your response be the same if the repayment schedule on the bonds differed from the pattern of depreciation (e.g., the bonds were repaid over only ten years or depreciation were charged on an accelerated basis)?

View Solution:

Sale on SolutionInn
  • CreatedAugust 13, 2014
  • Files Included
Post your question