Class, are general capital assets recorded in the general fund, or in other governmental funds? Why or why not?
Where are how are general capital assets reported?
Class, let's work through this example. Please take one part of the question, and do not post on a part already answered by a classmate, unless you disagree with their answer. Once we work through all parts, I will provide comments and the solution.
On July 1, the first day of its fiscal year, the city of Morgan sold bonds with a face value of $10,000,000 at 102 percent of par. The bonds bear annual interest at 6 percent; interest is payable semiannually. The bonds will mature in equal installments over 20 years. (The bond premium must be used for eventual bond redemption and is deposited directly in the debt service fund.) Assuming the bonds are tax-supported bonds sold to finance the construction of a sports complex, the operations of which will be financed by a special revenue fund when the complex is completed:
1) Name the type of fund and/or activity in which each of the following should be recorded. (If any of the following should not be recorded at all, enter "none" on the appropriate line.)
(a) The cash received for the sale of the bonds.
(b) The liability of $10,000,000 for bonds payable.
(c) The cost of the sports complex.
(d) Capitalization of bond interest paid or accrued during the period of construction.
(e) Amortization of premium on bonds sold.
2) Show in general journal form all entries that should be made to record the sale of the bonds. For each entry, indicate the fund or group in which the entry is made.
General Capital Assets
Recording of General Capital Assets
The purchases of general capital assets are recorded as expenditures instead of fund assets. The sales of the general capital assets are recorded as Other Financing Sources. Regardless of the classification, the general assets are used in the operations of the government and not for the purpose of re-sale. The assets also have lives that extend beyond a reporting period, although this may be adjusted by the capitalization policy of the government.
The general capital assets are depreciated at the government level while being capitalized in the governmental activity worldwide, also at the government-wide level. The assets will be debited to the expenditures section of the government fund. It is imperative to note that the general capital assets are expenditures from different governmental funds including the capital projects fund, the General fund, and the Special Revenue Fund.
There are certain types of GCAs that are not depreciated. The assets will include non-capitalized works of art and historical treasures, inexhaustible assets including land, and infrastructure assets where a modified approach has been developed.
1. A). Debit cash account,
B). Credit the bonds payable by $10,000,000
C). Debit the cost of the complex in the sports complex fund
Sports Complex Project Fund and Governmental Activities