Question

On December 1, 2018, a city issued $20 million in BANs and $6 million in RANs....

On December 1, 2018, a city issued $20 million in BANs and $6 million in RANs. By April 15, 2019, the date the city issued its financial statements for the fiscal year ending December 31, 2018, the city had neither converted the BANs into long-term bonds nor entered into a refinancing agreement to do so. However, the city repaid the RANs on February 28, 2019. The amount the city should report as an obligation of its general fund in its December 31, 2018, financial statements is

a. $0

b. $6 million

c. $20 million

d. $26 million

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Answer #1

d. $ 26 million

BANs are recorded as short term since they had not been converted to Long term instruments. So should be reported in the general fund as they did not convert it into Long term bonds until the Balance sheet issued.

RANs were repaid before the Financial statements were issued, but they are still accounted for as a Short Term obligation for Year end Dec 2018, because they are by nature Short term debt and even if paid back in Feb should still be reported as a Short term obligation on the General Fund.

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