Use the Following to Answer the Next Four Questions

question 120

Multiple Choice

Use the following to answer the next four questions:
On April 1, 2014, the City of Southern Ponds issued $4,000,000 in 4% general obligation, tax supported bonds at 101 for the purpose of constructing a new police station. The premium was transferred to a debt service fund. A total of $3,990,000 was used to construct the police station, which was completed before December 31, 2014, the end of the fiscal year. The remaining funds were transferred to the debt service fund. The bonds were dated April 1, 2014, and paid interest on October 1 and April 1. The first of 20 equal annual principal payments of $200,000 is due April 1, 2015.
-In addition to reporting a $4,000,000 liability and a $40,000 bond premium in the government-wide Statement of Net Assets,how would the bond sale be reported?

• A) As a $4,000,000 liability in the government-wide Statement of Net Assets and as a $4,000,000 other financing source in the debt service fund.
• B) As a $4,040,000 liability in the government-wide Statement of Net Assets, as a liability of $ 4,040,000 in the capital projects fund, and as an other financing source of $4,040,000 in the capital projects fund.
• C) A $4,040,000 other financing source in the capital projects fund, a $40,000 other financing use in the capital projects fund, and a $40,000 other financing source in the debt service fund.
• D) The $4,000,000 liability in the government-wide Statement of Net Assets and the $40,000 would also be recorded as a bond premium in the Statement of Net Assets.

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Definitions:

Economies of Scope

Cost advantages that enterprises obtain due to the efficient management of diverse business activities that enable them to share resources and capabilities across different products or segments.

Product Transformation Curve

Another term for the "production possibility frontier," which shows the different quantities of two goods that can be produced with a given set of resources.

Economies of Scope

Cost advantages that enterprises obtain due to efficiency improvements gained by producing a wider variety of goods or services.

Joint Cost Function

A cost function that describes the total cost of producing multiple products together, where the costs cannot be separated for each product.