Question

On January 1, 2020, a city had outstanding general obligation bonds payable of $900,000. During 2020, the city used a Debt Service Fund to repay $100,000 of bonds that were outstanding at the start of the year.

Based on the fund preclosing trial balances, what adjustments must the city make to prepare the government-wide financial statements on December 31, 2020?

Answer 1

To prepare the government-wide financial statements on December 31, 2020, the city will need to make two adjustments related to the outstanding general obligation bonds payable:

Recognize the principal payment of $100,000 that was made using the Debt Service Fund during the year. This payment will reduce the amount of outstanding general obligation bonds payable by $100,000, from $900,000 to $800,000.

Recognize any interest that was incurred on the outstanding general obligation bonds payable during the year. This will depend on the terms of the bonds, including the interest rate, the payment schedule, and any other factors that may affect the calculation of interest.

Once these adjustments have been made, the city will have an accurate reflection of the outstanding general obligation bonds payable on its government-wide financial statements as of December 31, 2020. It's important to note that these adjustments will only affect the government-wide financial statements and will not be reflected in the fund-level financial statements.

Step-by-step explanation: