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The City of Fremont's fiscal year ends June 30. The city issued the following general obligation...

The City of Fremont's fiscal year ends June 30. The city issued the following general obligation bonds:

On July 1, 2014, the city issued 7% $500,000 face value, 10-year bonds for $466,350 to yield 8%. Interest is payable on June 30 of each year.

On January 1, 2016, the city issued 7% $500,000 face value, 10-year bonds for $577,270 to yield 5%. Interest is payable on December 31 of each year.

a. Determine the amounts reported in the government-wide statement of activities and statement of net position for fiscal year 2017, related to the bonds.

HINT: Use the effective interest method and assume the total annual interest expense reported for the second bond is split equally between the two fiscal years. Round answers to the nearest dollar.

2017 Statement of Activities

Interest Expense __________

6/30/2017 Statement of Net Position

Interest Payable ___________

Bonds Payable ____________

Solutions

Expert Solution

Calculation of Effective Interest amortization for bonds issued on July 1,2014:-

Period ending Beginning net bond value Int. Exp. Payment Discount Ending net bond value (Beg.value*8%) (500000*7%) (Int. Exp - Pay) (Beg value + Discount)

30-06-2015 466,350 37308 35000 2308 468,658

30-06-2016 468,658 37492.64 35000 2492.64 471,150.64

30-06-2017 471,150.64 37692.05 35000 2692.05 473,842.69

30-06-2018 473,842.69 37907.42 35000 2907.42 476,750.11

Calculation of Effective Interest amortization for bonds issued on Jan 1,2016:-

Period ending Beginning net bond value Int. Exp. Payment Premium Ending net bond value (Beg.value*5%) (500000*7%) (Pay-Int exp) (Beg value + Premium)   

31-12-2016 577,270 28863.5 35000 6136.5 571,133.5

31-12-2017 571,135.5 28556.68 35000 6443.32 564,692.18

31-12-2018 564,692.18 28234.61 35000 6765.39 557,926.79

Calculation of Interest expense for the year 2017:-

Interest expense for bonds issued on July 1 2014 = 37692.05

Interest expense for bonds issued on Jan 1 2016 for 2017 = 14434.75(28863.5/2)

Interest expense for bonds issued on Jan 1 2016 for 2017 = 14278.34(28556.68/2)

Total interest expense for the year 2017 = 66405.14

Statement of net position:-

Interest payable for bonds issued on Jan 1 2016 = 14278.34

Total Interest payable as on 30-06-2017 = 14278.34

Bonds payable issued on July 1 2014:-

Bonds payable = 500,000

Less:- Unamortized discount = 26157.31

Total = 473,842.69

Bonds payable issued on Jan 1 2016:-

Bonds Payable = 500,000

Add:- Unamortized premium = 67911.84

Total = 567,911.84

ekkarill92 answered 2 years ago
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