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In August 2012 voters of Balcones, a medium- sized city, approved a $15 million general obliga- tion bond issue to ?nance the construction of recreational
In August 2012 voters of Balcones, a medium- sized city, approved a $15 million general obliga- tion bond issue to ?nance the construction of recreational facilities. So as to begin construction immediately, without waiting to complete the lengthy process of issuing long-term bonds, the city issued $4 million in BANs. The notes matured in March 2013, but the city had the right to prepay them at any time prior to maturity. On February 15, 2013 the city issued $15 million of 6%, 20-year GO bonds. Upon receiving the proceeds, it repaid the BANs, along with $80,000 in interest. 1. Prepare a journal entry to indicate how the city should report the BANs in its December 31, 2012 governmental fund ?nancial statements, assuming that it issued the statements after February 15, 2013. 2. Suppose that the city did not re?nance the BANs prior to the date the ?nancial statements were issued. What other evi- dence must the city present to justify reporting the BANs as long-term obliga- tions? Prepare a journal entry to indicate how the city should report the BANs in its governmental fund ?nancial statements if it is unable to provide this evidence. 3. Assume, also, that the city experienced a cash ?ow shortage in November 2012. Anticipating tax collections in January 2013, it issued $2 million in TANs that are due February 2013. In February 2013, instead of repaying the notes, it
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