The following was taken from the statistical section of the City of Wyoming, Michigan, annual report (see also Problem 8–7).

The accompanying table was drawn from the City of Fort Leah's schedule of long-term liabilities (all amounts in thousands).
1. Prepare the entry in the city's general fund to record the transactions affecting compensated absences during the year.
2. Prepare the entries to reflect the compensated absence transactions in the city's government-wide statements.
3. Prepare the entries in the capital projects and debt service funds to record the issuance and retirement of general obligation debt.
4. Prepare the entries to reflect the issuance and retirement of the general obligation debt in the government-wide statements.
5. Pension accounting is discussed in Chapter 10, which deals with fiduciary funds. However, based on what you know about expenditures and obligations in govern mental funds, discuss the significance of the $47 million addition to, and $53.5 million reduction in, ''net pension obligation.''
6. The city recently signed a five-year lease to rent space in an office building. Annual rent was $100,000 per year.
Where, if at all, on the schedule would the rent liability appear? Explain.
Assume that in its fiscal year ending June 30 the city issued an additional (net of repayments) $30 million in general obligation bonds and $6 million in revenue bonds.
It increased its bond reserves (assets available for debt service) by $200,000. Moreover, owing to both a recession and a change in valuing property, the assessed value of its property decreased by 5 percent.
1. What is the maximum the city could issue in general obligation bonds as of June 30?
2. Suppose the city:
a. Signed a five-year agreement with a waste disposal firm. The firm agreed to provide services to the city for $50,000 per year. The city could not cancel the contract unless the firm failed to deliver the specified services.
b. Signed a five-year lease to acquire equipment. The useful life of the equipment was also five years.
Annual payments were $50,000 and the city had the option to purchase the equipment at the end of its useful life for $1. The lease agreement was based on an interest rate of 8 percent and contained a ''nonappropriation clause,'' which local courts recognized as being decisive with respect to whether the debt was subject to the legal debt margin.
How would each be reflected in the city's government wide statement of net position? If you were writing the legislation establishing debt limits, would you make either leases or service contracts subject to the limits?
3. As indicated in the schedule, and as is typical of most debt limitations, the debt margin does not apply to revenue bonds. What do you think is the reason for this exemption? What argument could you make that revenue bonds should not beexempt?

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Compntation of Legal Debt Margin for General Obligation Bonds as of June 30 Value of assessed property $1,139,255,400 Debt limit-10 percenit 113,925,540 Amount of deht anplicable Total honded debt 27,442,00O Assets available for dcbt service 1,770,453 3,795,453 applicable to deht 23,646,547 90,278,993 Legal debt margin