QUESTION 50

Voters of Valdez School District, a public school district, approved construction of a new high school at a cost not to exceed $20 million.The district will finance the construction by issuing $20 million of 6 percent term bonds payable in 20 years.Because the site had already been prepared, the school district began construction immediately but the bonds would not be issued for nearly a year.Shortly before the fiscal year-end, the school district borrowed $5 million from a local bank due in one year with interest at 6.2 percent.The note will be repaid from bond proceeds.The school district secured a financing agreement with the bank to convert the debt to a 10-year debt if the school district is unable to sell the bonds by the due date.At year-end, how should the $5 million note be displayedin the government-wide financial statements?

1. Notes payable-long term $5 million;
2. Notes payable-short term$5million;
3. Nothing
4. None of above