Loose-leaf For Accounting For Governmental & Nonprofit Entities
18th Edition
ISBN: 9781260190083
Author: Jacqueline L. Reck James E. Rooks Distinguished Professor, Suzanne Lowensohn, Daniel Neely
Publisher: McGraw-Hill Education
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Textbook Question
Chapter 6, Problem 12C
A citizens’ group in your state has placed an amendment on an upcoming election ballot. The measure would prohibit new debt issuances by state or local governments, which would presumably reduce taxes as a result of less tax-supported debt. Supporters of the amendment claim the proposed measure will force government to operate more efficiently and cut bloated spending, while opponents fear that public services and the quality of life in the state will be severely affected if the amendment passes.
Required
- a. Why do governments typically issue general long-term debt? What types of services might be limited if debt was no longer a financing option?
- b. Consider each of the following statements regarding the amendment. Select at least one of the statements (numbered 1–4) to indicate your position on the proposed amendment. Incorporating the statement(s) selected, draft a memo supporting your position on the proposed amendment.
- (1) The state has enough money to spend. Government officials can spend more wisely or even cut their spending.
- (2) Voters’ frustration with government spending is understandable; however, borrowing restrictions will require that the state and local governments raise fees, reduce construction, or reduce programs and services.
- (3) Because there are so many creative ways of public financing, taxpayers are spending millions on long-term debt interest that they never got the opportunity to approve.
- (4) This measure is a direct reaction to taxpayer dissatisfaction with government; however, this reaction is so far overreaching that it will impact state jobs and diminish local governments’ ability to provide police and fire protection and to educate our children.
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6-12: Policy Issues Relating to General Long-Term Debt.
A citizens’ group in your state has placed an amendment on an upcoming election ballot. The measure would prohibit new debt issuances by state or local governments, which would presumably reduce taxes as a result of less tax-supported debt. Supporters of the amendment claim the proposed measure will force government to operate more efficiently and cut bloated spending, while opponents fear that public services and the quality of life inthe state will be severely affected if the amendment passes.
Required:a. Why do governments typically issue general long-term debt? What types of services might be limited if debt was no longer a financing option?
b. Consider each of the following statements regarding the amendment. Select at least one of the statements (numbered 1–4) to indicate your position on the proposed amendment. Incorporating the statement(s) selected, draft a memo supporting your position on the proposed amendment.
(1).…
Suppose expenses for Medicare and Medicaid are rising rapidly. Which strategy could the federal government use to solve this situation?
Make cuts to defense and education spending, and then increase income and payroll tax rates to reduce the effect of increasing expenses in the federal government.
Delay payments for the interest on the national debt and increase tax rates for payroll and corporate income taxes to raise funds for Medicare and Medicaid.
Increase corporate and individual income tax rates to raise revenue, and then eliminate payments to state and local governments to cut other costs in the federal government.
Increase payouts for entitlements and decrease income and payroll taxes so that consumers are provided with more money to pay for increased medical costs.
Chapter 6 Solutions
Loose-leaf For Accounting For Governmental & Nonprofit Entities
Ch. 6 - Prob. 1QCh. 6 - What disclosures about long-term liabilities are...Ch. 6 - Prob. 3QCh. 6 - Prob. 4QCh. 6 - Although the most common type of general long-term...Ch. 6 - What is overlapping debt? Why would a citizen care...Ch. 6 - Prob. 7QCh. 6 - Prob. 8QCh. 6 - How are debt issuance costs accounted for at the...Ch. 6 - Under what circumstances might a government...
Ch. 6 - Prob. 11CCh. 6 - A citizens group in your state has placed an...Ch. 6 - A county government and a legally separate...Ch. 6 - Prob. 14CCh. 6 - Evaluating Legal Debt Margins. (LO6-2) Youll be...Ch. 6 - Prob. 17.1EPCh. 6 - Proceeds from bonds issued to construct a new city...Ch. 6 - The liability for long-term debt issued to finance...Ch. 6 - Which one of the following statements regarding...Ch. 6 - Prob. 17.5EPCh. 6 - On March 2, 2020, 20-year, 6 percent, general...Ch. 6 - Prob. 17.7EPCh. 6 - Prob. 17.8EPCh. 6 - The liability for special assessment bonds for...Ch. 6 - Total general long-term indebtedness subject to...Ch. 6 - Payment of general obligation bond interest would...Ch. 6 - Debt issuance costs a. Include legal and...Ch. 6 - If bonds are sold at a premium: a. The premium is...Ch. 6 - Prob. 17.14EPCh. 6 - Prob. 17.15EPCh. 6 - Prob. 18EPCh. 6 - Budgeted and Actual Debt Service Transactions....Ch. 6 - Lease Agreement. (LO6-5) McCormick County agreed...Ch. 6 - Legal Debt Margin and Direct and Overlapping Debt....Ch. 6 - Debt Service Fund Trial Balance. (LO6-5) Following...Ch. 6 - Prob. 23EPCh. 6 - Term Bond Debt Service Fund Transactions. (LO6-5)...Ch. 6 - Prob. 25EP
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