please answer all of questions, thank you!! Hi senior auditor, I am currently do
ID: 2497974 • Letter: P
Question
please answer all of questions, thank you!!
Hi senior auditor,
I am currently downtown, at the San Diego County accounting office, conducting fieldwork for the government’s annual audit. While reviewing the Government-Wide 6/30/2015 Statement of Net Position, I noticed the government’s Net Position decreased drastically during the current year. Unable to pinpoint the direct source of this unexpected decline, I asked the County Administrator for an explanation. The County Administrator said “the decrease was caused by the long-term liability issued during the current year”. I believe the County Administrator’s explanation may be inaccurate….
When long-term debt is issued, what is the appropriate journal entry?
When long-term debt is issued, how does this affect the Statement of Net Position?
The County Administrator provided the Bond Indenture and all corresponding Bond Issuance documentation. The documentation clearly supports the existence of a new long-term liability. The Bond was issued at the beginning of the current year, on July 1, 2014. Could this new debt be triggering other new transactions?
Assuming there are other new transactions, what are the corresponding journal entries?
How do these corresponding journal entries affect the Statement of Net Position?
Do you think the new debt and other new transactions is the primary source of the decline? Why or why not?
Explanation / Answer
Journal Entry :
Bank/Cash A/c XXXX
To Long term debt XXXX
(Being the long term debt raised )
When the long term debt is issued it effects the statement of net position because the total debt of the company is increase therefore the net position also increases.
The new entries journal would be
Bank/Cash A/c xxxx
To Long term bonds xxxx
Being the long term bonds issued and raised the funds
the statement of net position is =Assets plus deferred outflows of resources, less liabilities, less deferred inflows of resources, equals net position,
Therefore it would effect the position
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