As discussed in Chapter4, governments must mark-to-market their investments (including held-to-maturity debt securities). Suppose that a city has in its portfolio debt securities that it intends to hold to maturity. Interest rates increase. Therefore the market value of the securities decreases, and accordingly the city must recognize an investment loss. Correspondingly, the city also has issued debt. As interest rates increase, the market value of its outstanding bonds also decreases. Irrespective of current accounting standards, do you think that the city should recognize a gain from the decrease in value of its outstanding bonds? Explain.
Answer to relevant QuestionsA city funds the construction of a golf course by issuing $50 million in general obligation bonds. However, it accounts for the golf course in an enterprise fund, and it intend store pay the debt from green fees. Should the ...A government accounts for a municipal landﬁll in an enterprise fund. How will it determine how much to charge as an expense (and add to a liability) each year that the landﬁll is in use? Suppose instead that it accounts ...Enterprise funds are also reported differently than are internal service funds in the proprietary fund statements of net position, and in the statements of revenues, expenses, and changes in net position. Explain why.The water and wastewater utility (enterprise) funds of three cities each paid $1 million in casualty insurance premiums. City A is insured by a small independent insurance company. City B is self-insured and accounts for its ...Sun City accounts for its telecommunication services in an internal service fund. In a recent year its records indicated the following:Billings to units accounted for in governmental funds $400,000 Billings to units ...
Post your question