A city constructs a new building by issuing debt in the amount of $3 million.How should the city report the debt proceeds in its Capital Projects Fund statement of revenues,expenditures,and changes in fund balance?
A)as a revenue
B)as an other financing source
C)as a liability captioned general long-term obligations
D)as a liability captioned due to the debt service fund

Question

Quizplus · Accepted Answer

The debt proceeds should be reported as an other financing source because it represents an inflow of resources that will be used to finance the capital project. Reporting it as a revenue would overstate the actual revenue of the fund, and reporting it as a liability would not accurately reflect the fact that the resources will be used to finance the project. The option to report it as "due to the debt service fund" is not applicable in this scenario.

A City Constructs a New Building by Issuing Debt in the Amount