Accounting For Governmental & Nonprofit Entities
18th Edition
ISBN: 9781259917059
Author: RECK, Jacqueline L., Lowensohn, Suzanne L., NEELY, Daniel G.
Publisher: Mcgraw-hill Education,
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Textbook Question
Chapter 6, Problem 17.10EP
Total general long-term indebtedness subject to debt margin calculations typically does not include
- a. Debt authorized but not issued as of year-end.
- b. Special assessment debt for which a government might be liable if collections are insufficient.
- c. General obligation debt.
- d. Lease obligations.
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Students have asked these similar questions
In accounting for short-term debt expected to be refinanced to long-term debt:
a. GAAP uses the authorization date to determine classification of short-term debt to be refinanced.
b. IFRS uses the authorization date to determine classification of short-term debt to be refinanced.
c. IFRS and GAAP use the financial statement date to determine classification of short-term debt to be refinanced.
d. GAAP uses the date of issue, but only for secured debt, to determine classification of short-term debt to be refinanced.
In accounting for short-term debt expected to be refinanced to long-term debt:(a) GAAP uses the authorization date to determine classification of short-term debt to be refinanced.
(b) IFRS uses the authorization date to determine classification of short-term debt to be refinanced.
(c) IFRS uses the financial statement date to determine classification of short-term debt to be refinanced.
(d) GAAP uses the date of issue, but only for secured debt, to determine classification of short-term debt to be refinanced.
A government’s MD&A states that government-wide net position decreased as a result of the issuance of a long-term liability during the current reporting period. Does this sound correct? How does the issuance of long-term debt typically affect net position in the year of issuance?
Chapter 6 Solutions
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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- Which of the following statements is false? Unmatured principal installments and accrued interest which is due shortly after year end are required to be reported as liabilities in the debt service fund at year end. An encumbrance in a capital project fund is created when the contract for the work is signed or issued. Premiums generated from the issuance of bonds for a capital projects fund are generally transferred to the Debt Service Fund. If taxes are levied specifically for payment of interest and principal on long-term debt, those taxes are recognized as revenues of the Debt Service Fund.arrow_forwardAn expenditure for general obligation long-term debt is always recorded at year-end in the governmental funds fora. accrued interest and accrued principal.b. accrued principal but not accrued interest.c. accrued interest but not accrued principal.d. neither accrued interest nor accrued principal.arrow_forwardWhere is debt callable by the creditor reported on the debtor's financial statements? a) Long term liability b) Current liability if the creditor intends to call the debt within the year , otherwise a long term liability. c) Current liability if it is probable that creditor will call the debt within the year, otherwise a long term liability. d) current liabilityarrow_forward
- One of the most effective ways to determine the overall reasonableness of interest bearing debt is to examine the relationship between recorded _____________________ and the average principal amount of debt outstanding during the year.arrow_forwardI have a little issue with one accounting assignment where they ask to calculate the WACC. However, in the financial statement provided, there are two types of long-term liabilities: long-term debt and other penalties. When calculating the Weight of long-term debt, should I use the total long-term liability or only the section indicated long-term debt?arrow_forwardDebt service funds are used to account for which of the following? Multiple Choice Payment of only interest on general long-term debt. Payment of only principal on general long-term debt. Payment of principal and interest on general long-term debt.arrow_forward
- Which of the following is most likely to be regarded as an estimated liability that is subject to provision? a. Deferred revenues b. Current portion of a long-term debt c. Payroll liabilities d. Vacation pay liabilityarrow_forwardThis year, Game Co. took advantage of market conditions to refund its outstanding debt. Game should report the excess of the carrying amount of the old debt over the amount paid to extinguish it as a(n) a. deferred credit to be amortized over life of new debt. b. part of continuing operations. c. prior period adjustment. d. extraordinary item, net of income taxes.arrow_forwardHow are general long-tern liabilities distinguished from other long-term liabilities of government? How does the financial reporting of general long-term liabilities differ from the financial reporting of other long-term liabilities?arrow_forward
- The current portion of long-term debt should a.be reclassified as a current liability b.be paid immediately c.not be separated from the long-term portion of debt d.be classified as a long-term liabilityarrow_forwardWhich of the following statements is not true for debt service funds? Multiple Choice Interest payable may be reported as a liability of the debt service fund. Special assessment debt for which the government has some obligation is paid through the debt service fund. All tax-supported bond principal is shown as a liability of the debt service fund. Bond principal can be shown as a liability when financial resources dedicated for payment of the principal have been transferred to the debt service fund and payment of principal is due early in the following year.arrow_forwardDebtholders receive note contracts, one for each note, that describe the payments promised by the issuer of the debt. In addition, the issuing corporation frequently enters a supplementary agreement, callcd a note indenture, with a trustee who represents the debtholders. The provisions or covenants of the indenture may place restrictions on the issuer for the benefit of the debtholders. For example, an indenture may require that the issuers debt to equity ratio never rise above a specified level or that periodic payments be made to the trustee who administers a sinking fund to provide for the retirement of debt. Consider Roswell Manufacturings debt indenture, which requires that Roswells debt to equity ratio never exceed 2:1. If Roswell violates this requirement, the debt indenture specifies very costly penalties, and if the violation continues, the entire debt issue must be retired at a disadvantageous price and refinanced. In recent years, Roswells ratio has averaged about 1.5:1 ($15 million in total liabilities and $10 million in total stockholders equity). However, Roswell has an opportunity to purchase one of its major competitors, Ashland Products. The acquisition will require $4.5 million in additional liabilities, but it will double Roswells net income. Roswell does not believe that a stock issue is feasible in the current environment. The Financial Accounting Standards Board issued a new standard concerning accounting for post employment benefits, which is strongly supported by the Securities and Exchange Commission. Implementation of the new standard will add about S2 million to Roswells long-term liabilities. Roswells CEO. Martha Cooper, has written a strong letter of objection to the FASB. The FASB received similar letters from over 300 companies. Required; 1. Write a paragraph presenting an analysis of the impact of the new standard on Roswell Manufacturing.arrow_forward
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