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2010rockcpa
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Joined: 10 Mar 2010
Online Status: Offline
Posts: 77

Posted: 04 Jun 2010 at 13:06 \| IP Logged

Wood City, which is legally obligated to maintain a debt service fund, issued the following general

obligation bonds on July 1, 1992:

Term of bonds 10 years

Face amount $1,000,000

Issue price 101

Stated interest rate 6%

Interest is payable January 1 and July 1. What amount of bond premium should be amortized in Wood's

debt service fund for purposes of fund financial reporting for the year ended December 31, 1992?

a. $1,000

b. $500

c. $250

d. $0

I know the answer is $0. since you are not supposed to amortize for govenmental fund reporting purposes.

But I am still a little fuzzy with how this premium is gonna to report? On governmental wide f/s? exactly in the same fashion as commercial purposes ?

Another question is: does governmental fund f/s report the current portion of this bond or nothing at all? if the current portion, how much?

Sorry. Very confused with this. Thanks.

mits07
Regular
Regular

Joined: 22 Jan 2010
Location: United States
Online Status: Offline
Posts: 115

Posted: 04 Jun 2010 at 13:26 \| IP Logged

In a governmental fund, debt service fund only reports the proceeds from Long-term debt. The bond proceeds includes the bond premium and bond discount, therefore, no amortization is reported.

Ex: Face of the bond is 1,000,000
Premium is 10,000

Bond Proceeds to be reported on debt service fund would be 1,010,000 as "other financing source".

2010rockcpa
Contributor

Joined: 10 Mar 2010
Online Status: Offline
Posts: 77

Posted: 04 Jun 2010 at 14:54 \| IP Logged

I got it. Thank you.

Are the discount or premium reported in governmental wide f/s ?

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