Question
Government Accounting Standards Case The City of James has $10 million of 10% bonds payable in its financial statements. These bonds contain a call provision.
Government Accounting Standards Case The City of James has $10 million of 10% bonds payable in its financial statements. These bonds contain a call provision. The Agent Company told the City that it will help find parties to call back the old bond and refinance the bonds with 7% interest payments. The new bonds will not change the original redemption dates from the old bonds. However, Agent Company demands a $100,000 service charge for its role in these transactions. While the City Council recognizes the benefits of the proposed services, the City is unsure how to disclose such payments when the transactions are completed. Thus, City asks its accountants for guidance.
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