Return to CHAPTER 85


state seal 85.85
Liabilities and Equity - Illustrative Entries

85.85.10

July 1, 2003

General
The entries in this section illustrate the recording of liabilities and equity in the accounting records. The entries are for illustrative purposes only and should not be considered all-inclusive. Entries posted to GL Code Series 71XX “In-Process” in treasury and treasury trust accounts also require an entry from the Office of the State Treasurer (OST) as illustrated below to clear the In-Process GL Codes.
 
      Dr. Cr.  
  In-Process (71XX) xxx    
    Current Treasury Cash Activity (OST Only) (4310)   xxx  
 

85.85.15

May 1, 1999

Establishment of short-term liabilities

To record the accrual of expenditures/expenses for goods and services from a vendor invoice. Refer to Subsection 85.70.20.c.

 
      Dr. Cr.  
  Accrued Expenditures/Expenses (6505) xxx    
    Appropriate Short-Term Payable GL Code (51XX)   xxx  
 

85.85.20

May 1, 1999

Payment of short-term liabilities

To record payment of a short-term liability.

      Dr. Cr.  
  Appropriate Short-Term Payable GL Code (51XX) xxx    
    Cash in Bank (1110) or In-Process (71XX)   xxx  
 
  Cash Expenditures/Expenses (6510) xxx    
    Accrued Expenditures/Expenses (6505)   xxx  
 

85.85.22

June 1, 2004

Long-term to short-term reclassification

To record unavailable revenue. For example, taxes due are accrued but will not be collected within the next 12 months.  Refer to Subsection 85.70.50. May be used only in governmental fund type accounts.

      Dr. Cr.  
  Long-Term Liability (52XX) xxx    
    Short-Term Payable (51XX)   xxx  
 

85.85.24

June 1, 2015

Unavailable revenues
85.85.24.a

To record unavailable revenue. For example, under a sales tax deferral program, taxes are accrued but will not be collected within the next 12 months.  Refer to Subsection 85.70.40. May be used only in governmental fund type accounts.

      Dr. Cr.  
  Taxes Receivable (1611) xxx    
    Unavailable Revenue (5292)   xxx  
 
85.85.24.b To record recognition of revenue once applicable recognition criteria have been met, i.e., taxes are collectible within the current period or soon enough after the end of the period to pay current liabilities.
      Dr. Cr.  
  Unavailable Revenue (5292) xxx    
    Accrued revenue (3205) Revenue Source Code (01XX) appropriate tax revenue code   xxx  
 

85.85.25

January 1, 2012

Unearned revenues
85.85.25.a

To record unearned revenue. For example, cash received from students for tuition and fees paid in advance of providing services. Refer to Subsection 85.70.45.

      Dr. Cr.  
  Cash in Bank (1110) or In-Process (71XX) xxx    
    Unearned Revenue (5190)   xxx  
 
85.85.25.b To record recognition of revenue once earning process is complete.
      Dr. Cr.  
  Unearned Revenue (5190) xxx    
    Cash Revenue (3210) Revenue Source Code
(0424) Tuition and Fees
  xxx  
 

85.85.30

June 1, 2013

Fund bond debt issuance and servicing
 

The following example is used to illustrate entries for recording the issuance and servicing of fund bond debt in a non-appropriated proprietary account. Generally, these bonds are revenue bonds. Refer to Subsection 85.72.20.c.

An agency issues revenue bonds with:

  • Par amount of $5,000,
  • Original issue discount (OID) of $200,
  • Underwriter’s discount (UD) of $60, and
  • Costs of issuance (COI) of $20. 

Details of the bond debt service are:

  • 1st year $500 principal, $300 interest, and
  • 2nd year $600 principal.

Note: Original issue discount (OID) results when the par of the bond exceeds its purchase price. Original issue premium (OIP) results when the par of the bond is less than the purchase price. If deemed material, OID and OIP are deferred (using GL Codes 1910 “Unamortized Discount on Bonds Sold,” and 5910 “Unamortized Premiums on Bonds Sold” respectively) and amortized over the life of the bonds using GL Code 6512 “Amortization Expense” Subobject WB “Amortization.”  Issuance costs, including underwriters’ discounts, are recorded as expenses using GL Code 6510 “Cash Expenditures/Expenses” and appropriate object codes such as C or E or Subobject PC “Other Debt Costs.”  If the OIP or OID is deemed immaterial, it should be recorded in the same manner as the other issuance costs. Refer to Subsection 85.72.20.c.

 
85.85.30.a To record the issuance of the revenue bonds and payment of the costs of issuance.
 
      Dr. Cr.  
  Cash in Bank (1110) 4,740    
  Cash Expenditures/Expenses (6510) Subobject PC (UD) 60    
  Unamortized Discount on Bonds Sold (1910) (OID)* 200    
    Revenue Bonds Payable (5262) (Par)   5,000  
 
  Cash Expenditures/Expenses (6510) Subobject PC (COI) 20    
    Cash in Bank (1110)   20  
 
*If the bond had an OIP instead of an OID GL Code 5910 “Unamortized Premiums on Bonds Sold” would be credited and amortized over the life of the bond.
 
85.85.30.b To record as short term that portion of principal due within the next fiscal year.
 
      Dr. Cr.  
  Revenue Bonds Payable (5262) 500    
    Revenue Bonds Payable (5162)   500  
 
85.85.30.c To record the payment of the first year’s debt service.
 
      Dr. Cr.  
  Revenue Bonds Payable (5162) 500    
  Cash Expenditures/Expenses (6510) (Subobject PB Interest) 300    
    Cash in Bank (1110)   800  
 
85.85.30.d To record annual amortization of original issue discount (OID) on a straight-line basis.
 
      Dr. Cr.  
  Amortization Expense (6512) (Subobject WB) 20    
    Unamortized Discount on Bonds Sold (1910)   20  
 
85.85.30.e At fiscal year-end for reporting purposes, to reclassify as short-term that portion of principal due within the next fiscal year. At fiscal year-end, the amount in GL Code 5162 should agree with the next year’s principal payment on the bond amortization schedule.
 
 
      Dr. Cr.  
  Revenue Bonds Payable (5262) 600    
    Revenue Bonds Payable (5162)   600  
 
 

Note: If this were a budgeted proprietary account, bond proceeds would be recorded as revenue by a credit to GL Code 3210 “Cash Revenues,” Revenue Source Code 0860 “Bonds Issued,” and then adjusted for GAAP reporting purposes through GL Code 3225 “Revenue Adjustments/Eliminations (GAAP),” Revenue Source Code 0860 to GL Code 5162 “Revenue Bonds Payable .” Likewise, payments on bond principal would be initially recorded as expenditure by a debit to GL Code 6510 Subobject PA “Principal,” and then adjusted for GAAP reporting purposes through GL Code 6525 “Expense Adjustments/Eliminations (GAAP),” Subobject PA to GL Code 5162.

85.85.35

January 1, 2011

General bond debt issuance and servicing
  The following example is used to illustrate entries for recording the issuance and servicing of general bond debt:

  • Par amount of $5,000,
  • Original issue premium (OIP) of $200,
  • Underwriter’s discount (UD) of $60, and
  • Costs of issuance (COI) of $20. 

Details of the bond debt service are:

  • 1st year $500 principal, $300 interest, and
  • 2nd year $600 principal.

Note: Discounts that are related to underwriters’ fees are handled consistent with other issue costs. Original issue discount (OID) results when the par of the bond exceeds its purchase price. Original issue premium (OIP) results when the par of the bond is less than the purchase price. Costs of issuance (COI) are generally included in the proceeds and paid separately.  Refer to Subsection 85.72.20.c.

For purposes of this example, proceeds of the debt issue will be used to build a facility to house a general governmental agency.  The COI for general obligation bond debt sold by the Office of the State Treasurer (OST) are always included in the proceeds and paid separately by OST.

85.85.35.a

To record the issuance of the bonds and payment of the costs of issuance.

 

Office of the State Treasurer:

 
State Building Construction Account (Account 057):
      Dr. Cr.  
  Receipts In-Process (7110) 5,140    
  Cash Expenditures/Expenses (6510) Subobject ER - Other Purchased Services (UD) 60    
    Cash Revenues (3210) Revenue Source Code (0863) Original Issue Premium - Bonds (OIP)   200  
    Cash Revenues (3210) Revenue Source Code (0860) Bonds Issued or (0864) Taxable Bonds Issued (Par)   5,000  
 
  Cash Expenditures/Expenses (6510) with appropriate subobject for COI 20    
    In-Process (71XX)   20  
 
 
General Long-Term Obligations Subsidiary Account (Account 999):
      Dr. Cr.  
  Amount to be Provided for Retirement of Long-Term Obligations (1820) (Par) 5,000    
    General Obligation Bonds Payable (5161)   500  
    General Obligation Bonds Payable (5261)   4,500  
 
  Note: If bond proceeds are being distributed to accounts other than Account 057, the costs of issuance (COI) will be prorated to those accounts based on the portion of the par amount that they receive.
 
85.85.35.b

To record a debt service transfer from an operating (reimbursing) account, through the General Fund, and then to a debt service fund type account for a reimbursable bond.

 

Office of the State Treasurer (Agency 010):

 
Operating (Reimbursing) Account:
      Dr. Cr.  
  Cash Revenues (3210) Revenue Source Code (0694) Operating Transfers - Debt Service Reimbursements 800    
    Journal Vouchers In-Process (7140)   800  
 
 
General Fund (Account 001):
      Dr. Cr.  
  Journal Vouchers In-Process (7140) 800    
    Cash Revenues (3210) Revenue Source Code (0694) Operating Transfers - Debt Service Reimbursements   800  
 
  Cash Revenues (3210) Revenue Source Code (0694) Operating Transfers - Debt Service Reimbursements 800    
    Journal Vouchers In-Process (7140)   800  
 
 
Debt Service Account (Account 381 or Account 383):
      Dr. Cr.  
  Journal Vouchers In-Process (7140) 800    
    Cash Revenues (3210) Revenue Source Code (0694) Operating Transfers - Debt Service Reimbursements   800  
 
 
General Long-Term Obligations Subsidiary Account (Account 999):
      Dr. Cr.  
  Amount Available in Debt Service Funds (1810) 800    
    Amount to be Provided for Retirement of Long-Term Obligations (1820)   800  
 
85.85.35.c If the bond payment does not relate to a reimbursable bond, then the debt service transfer is made directly from the General Fund to a debt service fund type account as follows:
 
 
Office of the State Treasurer (Agency 010):
General Fund (Account 001):
      Dr. Cr.  
  Cash Expenditures/Expenses (6510) Subobject MP Interfund Transfers Out – Principal 500    
  Cash Expenditures/Expenses (6510) Subobject MI  Interfund Transfers Out- Interest  300    
    Journal Vouchers In-Process (7140)   800  
           
Debt Service Account (Account 3XX):
      Dr. Cr.  
  Journal Vouchers In-Process (7140) 800    
    Cash Expenditures/Expenses (6510) Subobject MC Interfund Transfers In – Principal   500  
    Cash Expenditures/Expenses (6510) Subobject MD Interfund Transfers In – Interest   300  
 

General Long-Term Obligations Subsidiary Account (Account 999):

      Dr. Cr.  
  Amount Available in Debt Service Funds (1810) 800    
   

Amount to be Provided for Retirement of Long-Term Obligations (1820)

  800  
 
85.85.35.d To record the first debt service payment.
 
Debt Service Account (Account 3XX):
      Dr. Cr.  
  Cash Expenditures/Expenses (6510) Subobject PA Principal 500    
  Cash Expenditures/Expenses (6510) Subobject PB Interest 300    
    Journal Vouchers In-Process (7140)   800  
 
General Long-Term Obligations Subsidiary Account (Account 999):
      Dr. Cr.  
  General Obligations Bonds Payable (5161) 500    
    Amount to be Provided for Retirement of Long-Term Obligations (1820)   500  
 
  Amount to be Provided for Retirement of Obligations (1820) 800    
    Amount Available in Debt Service Funds (1810)   800  
 
85.85.35.e At fiscal year-end for reporting purposes, to reclassify as short-term that portion of principal due within the next fiscal year. At fiscal year-end, the amount in GL Code 5161 should agree with the next year’s principal payment on the general obligation bonds amortization schedule.

 
General Long-Term Obligations Subsidiary Account (Account 999):
      Dr. Cr.  
  General Obligations Bonds Payable (5261) 600    
    General Obligations Bonds Payable (5161)   600  
 

85.85.40

March 17, 2010

Lease-purchase agreements (Capital leases)

85.85.40.a GOVERNMENTAL FUND TYPE ACCOUNTS (AGENCY ENTRIES)
 

The following example is used to illustrate the lease purchase entries for capital leases in a governmental fund type account. Refer to Subsection 85.72.30.

An agency operating from the General Fund (governmental fund type account) entered into an agreement to lease a copying machine with a fair value of $15,000 for 60 months at the rate of $300 per month. The current interest rate is 12 percent and the present value of the minimum lease payments is $13,621 (annuity due). Since the value of the asset meets the state's capitalization threshold, this lease-purchase meets the state's criteria for a capital lease (refer to Subsection 30.20.30 for further information on capitalization criteria for capital leases). The amount to be capitalized is $13,621, which is the lesser of the fair value and net present value. Therefore, the entries to be recorded for a capital lease are as follows:

85.85.40.a.(1) To record the capital lease purchase of a capital asset and the lease liability.

 

Operating Account:
      Dr. Cr.  
  Capital Assets Acquisition by Lease-Purchase Agreements or Certificates of Participation (6514)
Subobject JCFurnishings and Equipment or other appropriate subobject

13,621

 

   
    Other Financing Sources (3221) Revenue Source Code (0809) Capital Lease Acquisition  

13,621

 

 
 

General Capital Assets Subsidiary Account (Account 997):

      Dr. Cr.  
  Furnishings and Equipment (2410) 13,621    
    Investment in General Capital Assets (9850)   13,621  
 

General Long-Term Obligations Account Group (Account 999):

      Dr. Cr.  
  Amount to be Provided for Retirement of Long-Term Obligations (1820) 13,621    
    Lease-Purchase Agreements Payable (5172)   2,229  
    Lease-Purchase Agreements Payable (5272)   11,392  
 
 

Note: Contact the Office of the State Treasurer for the current rate of interest, for computing present value. Capital leases are computed as annuities due because the payments are made at the first of the month; other capital purchases may be computed as ordinary annuities.

85.85.40.a.(2)

To record the first periodic payment of lease-purchase liability.

Note: No interest is accrued because the first lease payment is made at the beginning of the first month of the lease.

 
Operating Account:
      Dr. Cr.  
  Cash Expenditures/Expenses (6510) Subobject PA - Principal 300    
    Cash in Bank (1110) or In-Process (71XX)   300  
 
 

General Long-Term Obligations Subsidiary Account (Account 999):
To reduce the lease-purchase liability by the amount of periodic payment on the principal due.

 
      Dr. Cr.  
  Lease-Purchase Agreements Payable (5172) 300    
    Amount to be Provided for Retirement of Long-Term Obligations (1820)   300  
 
85.85.40.a.(3) To record second periodic payment on a capital lease-purchase agreement.
 

Operating Account:
The interest computation: $13,621 less the first month's payment $300, times one percent the monthly interest rate.

 
      Dr. Cr.  
  Cash Expenditures/Expenses (6510) Subobject PA - Principal 167    
  Cash Expenditures/Expenses (6510) Subobject PB - Interest 133    
    Cash in Bank (1110) or In-Process (71XX)   300  
 

General Long-Term Obligations Subsidiary Account (Account 999):
To reduce the lease-purchase liability by the amount of periodic payment on the principal due.

 
      Dr. Cr.  
  Lease-Purchase Agreements Payable (5172) 167    
    Amount to be Provided for Retirement of Long-Term Obligations (1820)   167  
 

85.85.40.a.(4)

To reclassify as short term that portion of the liability due within the next fiscal year. At fiscal year-end, the amount in GL Code 5172, should be the same as the next year’s principal payment on the agency’s lease agreement amortization schedule.

 

General Long-Term Obligations Subsidiary Account (Account 999):
To reduce the lease-purchase liability by the amount of periodic payment on the principal due.

 
      Dr. Cr.  
  Lease Purchase Agreements Payable (5272) 167    
    Lease Purchase Agreements Payable (5172)   167  
 
85.85.40.b Proprietary and Trust Fund Type Accounts
 

The following example is used to illustrate the lease purchase entries for capital leases in proprietary and trust fund type accounts. Refer to Subsection 85.72.30.

An agency operating from a proprietary fund type account entered into an agreement to lease a copying machine with a fair value of $15,000 for 60 months at the rate of $300 per month. The current interest rate is 12 percent and the present value of the minimum lease payments is $13,621 (annuity due). Since the value of the asset meets the state's capitalization threshold, this lease-purchase meets the state's criteria for a capital lease. Refer to Subsection 30.20.30 for further information on capitalization criteria for capital leases. The amount to be capitalized is $13,621, which is the lesser of the fair value and net present value. Therefore, the entries to be recorded in the proprietary fund for the capital lease are as follows:

85.85.40.b.(1) To record the capital lease-purchase of a capital asset and the lease liability. The asset is recorded at cost, excluding interest, of the asset financed. The current lease liability represents that portion of the lease obligations due within one year and the long-term liability represents lease obligations maturing thereafter.
 

 

      Dr. Cr.  
  Furnishings and Equipment (2410) 13,621    
    Lease-Purchase Agreements Payable (5172)   2,229  
    Lease-Purchase Agreements Payable (5272)   11,392  
 
85.85.40.b.(2) To record the first periodic payment of a lease-purchase liability. The entire payment of the principal due is charged to the current lease-purchase agreements payable. No interest is accrued because the payment is made at the beginning of the first month of the lease.
 

 

      Dr. Cr.  
  Lease-Purchase Agreements Payable (5172) 300    
    Cash in Bank (1110) or In-Process (71XX)   300  
           
Budgeted proprietary and trust fund type accounts require an additional entry to record an appropriated disbursement for the portion of the payment applicable to the principal.
      Dr. Cr.  
  Cash Expenditures/Expenses (6510) Subobject PA - Principal 300    
    Expense Adjustments/Eliminations (GAAP) (6525) Subobject PA - Principal   300  
           
85.85.40.b.(3) To record the second periodic payment of a capital lease-purchase liability paid from a budgeted account. Payment of the principal due is charged to the current lease-purchase agreements payable.
 

 

      Dr. Cr.  
  Cash Expenditures/Expenses (6510) Subobject PB - Interest 133    
  Lease-Purchase Agreements Payable (5172) 167    
    Cash in Bank (1110) or In-Process (71XX)   300  
 
Budgeted proprietary and trust fund type accounts require an additional entry to record the appropriated disbursement. The amount to be recorded is the portion of the payment applicable to the principal.
 
      Dr. Cr.  
  Cash Expenditures/Expenses (6510) Subobject PA - Principal 167    
    Expense Adjustments/Eliminations (GAAP) (6525) Subobject PA - Principal   167  
           
85.85.40.b.(4) At fiscal year end, to reclassify from long-term to short-term the principal portion of the lease-purchase liability due within the next fiscal year. At fiscal year-end, the amount in GL Code 5172 should be the same as the next year’s principal payment on the agency’s lease agreement amortization schedule.
 

 

      Dr. Cr.  
  Lease-Purchase Agreements Payable (5272) 167    
    Lease-Purchase Agreements Payable (5172)   167  
 
85.85.40.c Computation of Present Value Annuities
 

Any annuity is a series of equal payments made at regular intervals of time.  The time intervals between payments are called payment periods.  An annuity is a compound interest situation with periodic payments.  When the payments are made at the end of the payment periods, the annuity is called an ordinary annuity.  When the payments are made at the beginning of the payment periods, the annuity is called an annuity due.

 

Computation of present value may be achieved by use of the following formulas:

Where:

Pv = present value factor
i = interest rate
n = number of periods

 

Ordinary Annuity/Present Value Formula - A loan is a prime example of this annuity situation in which a sum of money is to be repaid with interest by certain payments for a fixed number of periods. The present value of the loan can be computed by multiplying the periodic loan payments by the present value factor. The present value factor is calculated by using the following formula:

1  
Pv = 1- (1+i)n  
i  
   
 

Annuity Due/Present Value Formula - Rent or lease situations are common examples of this type of annuity. The present value of the rent or lease can be computed by multiplying the periodic rent/lease payments by the present value factor. The present value factor is calculated by using the following formula:

(However, the formula need not be used, since tables showing present values computed with the formula at various interest rates are readily available.)
   
1  
Pv = 1- (1+i)n and adding 1 to the computed amount
i  
   

85.85.45

June 1, 2013

Equipment Certificates of Participation (COP)
85.85.45.a

GOVERNMENTAL FUND TYPE ACCOUNTS (AGENCY ENTRIES)

 

The following example is used to illustrate entries for equipment certificates of participation (COP) in a governmental fund type account. Refer to Subsection 85.72.40.c.

An agency operating in a governmental fund type account purchases a piece of equipment for $10,000, and finances it with a COP. 

Details of the COP issue are:

  • Par amount of $10,115,
  • Original issue premium (OIP) of $10,
  • Underwriter’s discount (UD) of $50, and
  • Costs of issuance (COI) of $75.

Details of the COP debt service are:

  • 1st year $2,000 principal, $600 interest, and
  • 2nd year $2,200 principal.

Note: The actual par value of the COP is slightly higher than the proceeds required by the agency to cover issue costs, such as costs of issuance (COI) and the original issue discount (OID) and underwriter’s discount (UD).  The OID, results when the par of the COP is more than the purchase price.  Original issue premium (OIP) results when the par of the COP is less than the purchase price. Discounts that are related to underwriters’ fees are handled consistent with other issue costs. COI are generally included in the proceeds and paid separately by OST. OST provides agencies with a statement detailing this information. The agency is to include the financing costs as part of the cost of the asset that is capitalized and depreciated.

85.85.45.a.(1)

To record the COP liability, original issue discount, underwriter’s discount, and the expense of the costs of issuance (paid by OST).  When the COP is sold by OST, it becomes an obligation of the agency even if the cash proceeds have not yet been received by the agency.  The time period between the COP sale date and closing date is generally two weeks or less.

 

Operating Account:

      Dr. Cr.  
  Due from Other Agency – OST (1354) 10,000    
  Capital Asset Acquisitions by Lease-Purchase Agreements of Certificates of Participation (6514) Subobject PC - Other Debt Costs (UD + COI) 125    
    Other Financing Sources (3221) Revenue Source Code (0869) Original Issue Premium - COPs (OIP)*   10  
    Other Financing Sources (3221) Revenue Source Code (0807) Certificates of Participation (Par)   10,115  
 

*If the COP had an OID instead of an OIP Revenue Source Code 0868 “Original Issue Discount - COPs” would be debited.

 
General Long-Term Obligations Subsidiary Account (Account 999):
      Dr. Cr.  
  Amount to be provided for retirement of Long-Term Obligations (1820) 10,115    
    Certificates of Participation Payable (5173)   2,000  
    Certificates of Participation Payable (5273)   8,115  
 
85.85.45.a.(2) To record the agency’s purchase of equipment,  the subsequent reimbursement with COP proceeds from OST, and the capitalization of the equipment in Account 997. The purchase of the equipment and the reimbursement from OST may be several months apart.

 

Operating Account:

      Dr. Cr.  
  Cash Expenditures/Expenses (6510) Object J - Capital Outlays* 10,000    
    Cash in Bank (1110) or In Process (71XX)*   10,000  
         
 

Capital Asset Acquisitions by Lease-Purchase Agreements or Certificates of Participation (6514) Subobject JC - Furnishing and Equipment*

10,000    
    Cash Expenditures/Expenses (6510) Object J - Capital Outlays*   10,000  
 
  Cash in Bank (1110) or  In Process (71XX)* 10,000    
    Due from Other Agency – OST (1354)   10,000  
 
General Capital Assets Subsidiary Account (Account 997):
      Dr. Cr.  
  Furnishings and Equipment (2410) 10,115    
    Investment in General Capital Assets (9850)   10,115  
 
 

*If OST pays the vendor directly for the equipment, then the agency would not record the cash receipt or the cash disbursement entries (since there is no reimbursement to the agency). However, the agency would still record the capital acquisition in GL 6514 Subobject JC with the credit offset in GL Code 1354 "Due from Other Agency - OST."

Note: If a COP has been authorized and equipment costs are incurred in one fiscal year but the COP is not issued until the subsequent year, agencies should debit a receivable, such as GL Code 1352 “Due from Other Governments,” and credit expenditures to GL Code 6510 in the year the equipment costs are initially incurred. When the COP is issued in the subsequent year, the agency should credit the GL Code 1352 and debit cash when the COP proceeds are received, along with a debit to GL Code 6514 Subobject JC with the offsetting credit to GL Code 3221 Revenue Source Code 0807.

85.85.45.a.(3)

To record the first year COP debt service payment (principal and interest).

 

Operating Account:

      Dr. Cr.  
  Cash Expenditures/Expenses (6510) Subobject PD - Principal COP Lease/Purchase Agreements 2,000    
  Cash Expenditures/Expenses (6510) Subobject PE - Interest COP Lease/Purchase Agreements 600    
    Cash in Bank (1110) or In-Process (71XX)   2,600  
 
General Long-Term Obligations Subsidiary Account (Account 999):
      Dr. Cr.  
  Certificates of Participation Payable (5173) 2,000    
    Amount to be Provided for Retirement of Long-Term Obligations (1820)   2,000  
 
85.85.45.a.(4) At fiscal year-end for reporting purposes, to reclassify as short-term that portion of principal due within the next fiscal year. At fiscal year-end, the amount in GL Code 5173 should agree with the next year’s principal payment on the agency’s COP amortization schedule.

 
General Long-Term Obligations Subsidiary Account (Account 999):
      Dr. Cr.  
  Certificates of Participation Payable (5273) 2,200    
    Certificates of Participation Payable (5173)   2,200  
 
85.85.45.b

PROPRIETARY FUND TYPE ACCOUNTS (AGENCY ENTRIES)

 

The following example is used to illustrate entries for equipment certificates of participation (COP) in a budgeted proprietary fund type account.  Refer to Subsection 85.72.40.c.

An agency operating in a proprietary fund type account purchases a piece of equipment for $10,000, and finances it with a COP.

  • Par amount of $10,115,
  • Original issue premium (OIP) of $10,
  • Underwriter’s discount (UD) of $50, and
  • Costs of issuance (COI) of $75.

Details of the COP debt service are:

  • 1st year $2,000 principal, $600 interest, and
  • 2nd year $2,200 principal.

Note: The actual par value of the COP is slightly higher than the proceeds required by the agency to cover issue costs, such as costs of issuance (COI) and original issue discount (OID).   OID results when the par of the COP is more than the purchase price. Original issue premium (OIP) results when the par of the COP is less than the purchase price. Discounts that are related to underwriters’ fees are handled consistent with other issue costs. COI are generally included in the proceeds and paid separately by OST. OST provides agencies with a statement detailing this information. The agency is to include the financing costs as part of the cost of the asset that is capitalized and depreciated.

In proprietary fund type accounts COP issue costs, such as COI and UD are expensed using GL Code 6510 “Cash Expenditures/Expenses” Subobject PC “Other Debt Costs.” 

If the OID or OIP is deemed material, it should be deferred using GL Code 1911 “Unamortized Discounts on Certificates of Participation” or GL Code 5920 “Unamortized Premiums on Certificates of Participation” respectively.  The amount deferred  should be amortized over the life of the COP using GL 6512 “Amortization Expense” Subobject WB “Amortization.”  If the OIP or OID is deemed immaterial, it should be recorded in the same manner as the other issuance costs.

All of these entries are made in the agency’s Operating Account:

85.85.45.b.(1) To record the agency’s purchase of equipment; the COP liability; the subsequent receipt of COP proceeds from OST; the elimination of the budgeted disbursement; and the capitalization of the equipment.  When the COP is sold by OST, it becomes an obligation (liability) of the agency, even if the cash proceeds have not yet been received by the agency.  The time period between the COP sale date and closing date is generally two weeks or less.
 
 
      Dr. Cr.  
  Cash Expenditures/Expenses (6510) Subobject JC Furnishings and Equipment 10,000    
    Cash in Bank (1110) or In-Process (71XX)   10,000  
 
  Due from Other Agency – OST (1354) 10,000    
  Cash Expenditures/Expenses (6510) Subobject PC - Other Debt Costs (UD + COI – OIP)* 115    
    Certificates of Participation Payable (5173)   2,000  
    Certificates of Participation Payable (5273)   8,115  
 
*If the COP had an OID instead of an OIP, the OID amount would be added to the UD and COI.
 
  Cash in Bank (1110) or In-Process (71XX) 10,000    
    Due from Other Agency – OST (1354)   10,000  
 
  Furnishings and Equipment (2410) 10,115    
    Expense Adjustment/Eliminations (GAAP) (6525) Subobject JC - Furnishings and Equipment   10,000  
    Expense Adjustment/Elimination (6525) Subobject PC – Other Debt Costs (UD + COI  - OIP)   115  
 
85.85.45.b.(2) To record the first year COP debt service payment (principal and interest) and the elimination of the budgeted principal expenditure.
 
      Dr. Cr.  
  Cash Expenditures/Expenses (6510) Subobject PE – Interest COP Lease/Purchase Agreements 600    
  Cash Expenditures/Expenses (6510) Subobject PD –Principal COP Lease/Purchase Agreements 2,000    
    Cash in Bank (1110) or  In-Process (71XX)   2,600  
 
  Certificates of Participation Payable (5173) 2,000    
    Expense Adjustment/Eliminations (GAAP) (6525) Subobject PD –Principal COP Lease/Purchase Agreements   2,000  
 
85.85.45.b.(3)

At fiscal year-end for reporting purposes, to reclassify as short-term that portion of principal due within the next fiscal year.  At fiscal year-end, the amount in GL Code 5173 should agree with the next year’s principal payment on the agency’s COP amortization schedule.

 
      Dr. Cr.  
  Certificates of Participation Payable (5273) 2,200    
    Certificates of Participation Payable (5173)   2,200  
 
85.85.45.c OFFICE OF THE STATE TREASURER (AGENCY 010) ENTRIES
 

Using the same example as in Subsection 85.85.45 above, an agency purchases a piece of equipment for $10,000, and finances it with a COP. 

  • Par amount of $10,115,
  • Original issue premium (OIP) of $10,
  • Underwriter’s discount (UD) of $50, and
  • Costs of issuance (COI) of $75.

Details of the COP issue are:

  • 1st year $2,000 principal, $600 interest, and
  • 2nd year $2,200 principal.

Note: The actual par value of the COP is slightly higher than the proceeds required by the agency to cover issue costs, such as the original issue discount (OID), the underwriter's discount (UD), and costs of issuance (COI).  The COI is included in the proceeds but not the OID or the UD. 

While agency entries differ if the equipment is acquired by a governmental or proprietary fund type account, the OST entries are the same.

85.85.45.c.(1)

To record the closing of the COP sale with the underwriter.

 

Certificate of Participation and Other Financing – State (Account 739):

      Dr. Cr.  
  Receipts-In-Process (7110) (Par +OIP - UD) 10,075    
    Cash Revenues (3210) Revenue Source Code (0499) Other Revenues (COI)   75  
    Due to Other Agency (5154)   10,000  
 
85.85.45.c.(2)

To distribute the COP proceeds to the state agency and pay the costs of issuance.

 

Certificate of Participation and Other Financing – State (Account 739):

      Dr. Cr.  
  Due to Other Agency (5154) 10,000    
    In-Process (71XX)   10,000  
 
  Accrued Expenditures/Expenses (6505) with appropriate subobject (COI) 75    
    Accounts Payable (5111) (COI)   75  
 
  Cash Expenditures/Expenses (6510) (appropriate subobject) (COI) 75    
    Accrued Expenditures/Expenses (6505) with appropriate subobject (COI)   75  
 
  Accounts Payable (5111) (COI) 75    
    In-Process (71XX) (COI)   75  
 
85.85.45.c.(3)

To record the receipt of the first debt service payment from an agency. 

 

Certificate of Participation and Other Financing – State (Account 739):

      Dr. Cr.  
  In-Process (71XX) 2,600    
    Due to Fiscal Agents (5130) (principal and interest)   2,600  
 
 

Note: OST temporarily invests the payments received from agencies for 30 days until the debt service payment is due to the fiscal agent. This activity is recorded by transferring In-Process (71XX) in and out of the Local Government Investment Pool (1206).

85.85.45.c.(4)

To record payment to the fiscal agent.

 

Certificate of Participation and Other Financing – State (Account 739):

      Dr. Cr.  
  Due to Fiscal Agents (5130) 2,600    
    In-Process (71XX)   2,600  
 

85.85.50

June 1, 2013

Real Estate Certificates of Participation (COP)
85.85.50.a GOVERNMENTAL FUND TYPE ACCOUNTS (AGENCY ENTRIES)
 

The following example is used to illustrate entries for real estate certificates of participation (COP) in a governmental fund type account.  Refer to Subsection 85.72.40.d. 

An agency operating in a governmental fund type account obtains proper legislative approval for construction of a new state office building and applies to the Office of the State Treasurer (OST) for COP financing.  OST sells a COP.  Proceeds of the COP are used to pay for construction costs and interest incurred during the construction period.

Details of the COP issue are:

  • Par amount of $73.6 million,
  • Original issue premium (OIP) of $.7 million,
  • Underwriter’s discount (UD) of $.2 million,
  • Costs of issuance (COI) of $.1 million,
  • COP proceeds for construction $60 million,
  • COP proceeds for interest costs $14 million, and
  • Net COP proceeds held by OST for the agency $74 million ($60 million for construction costs and $14 million for construction period interest).

Note: Original issue discount (OID) results when the par of the COP is more than the purchase price. An OIP results when the par of the COP is less than the purchase price.  Discounts that are related to underwriters’ fees are handled consistent with other issue costs. COI are generally included in the proceeds and paid separately. OST receives cash proceeds for the COI, but not for the UD and the OID. 

Details of the first year:

  • $10 million is expended on construction,
  • Debt service is $4 million, interest only, and
  • Unspent construction funds earn $.8 million in interest revenue.

Unspent proceeds are held by OST and invested in the Local Government Investment Pool (LGIP) or with a trustee.

Note: Construction period interest is not capitalized in governmental fund type accounts.

85.85.50.a.(1)

To record the liability for the real estate COP, and the original issue premium, underwriter’s discount, and the expense of the costs of issuance (paid by OST).  When the COP is sold by OST, it becomes an obligation (liability) of the agency, even if the cash proceeds have not yet been received by the agency.  The time period between the COP sale date and the closing date is generally two weeks or less.

 

Construction Account:

      Dr. Cr.  
  Due from Other Agency-OST (1354) 74 mil    
  Capital Asset Acquisitions by Lease-Purchase Agreements or Certificates of Participation (6514 ) Subobject PC – Other Debt Costs (UD + COI) .3 mil    
    Other Financing Sources (3221) Revenue Source Code (0807) Certificates of Participation (Par)   73.6 mil  
    Other Financing Sources (3221) Revenue Source Code (0869) Original Issue Premium - COPs   .7 mil  
 

General Long-Term Obligations Subsidiary Account (Account 999):

      Dr. Cr.  
  Amount to be Provided for Retirement of Long-Term Obligations (1820) 73.6 mil    
    Certificates of Participation Payable (5273)   73.6 mil  
 
 

Note: Because interest only is due during the construction period, the entire obligation is initially coded long-term.

85.85.50.a.(2)

To record construction expenditures and reimbursement from OST.

 

Construction Account:

      Dr. Cr.  
  Cash Expenditures/Expenses (6510)  Object J –Capital Outlays 10 mil    
    Cash in Bank (1110) or In-Process (71XX)   10 mil  
 
  Capital Asset Acquisitions by Lease -Purchase Agreements or Certificates of Participation (6514) Subobject JF -Buildings 10 mil    
    Cash Expenditures/Expenses (6510) Object J – Capital Outlays   10 mil  
 
  Cash in Bank (1110) or In-Process (71XX) 10 mil    
    Due from Other Agency-OST (1354)   10 mil  
 
 

Note: If a COP has been authorized and construction project costs are incurred in one fiscal year but the COP is not issued until the subsequent year, agencies should debit a receivable, such as GL Code 1352 Due from Other Governments, and credit expenditures to GL Code 6510 in the year the project costs are initially incurred.  When the COP is issued in the subsequent year, the agency should credit the GL Code 1352 and establish the GL Code 1354 from the OST.

85.85.50.a.(3)

To record first year interest-only debt service payment.  This payment is made by OST from the COP proceeds held by OST to cover interest expense during the construction period. 

 

Construction Account:

      Dr. Cr.  
  Cash Expenditures/Expenses (6510) Subobject PE –Interest COP Lease-Purchase Agreements 4 mil    
    Due from Other Agency-OST (1354)   4 mil  
 
85.85.50.a.(4)

To recognize interest earned on unspent COP proceeds held by OST and reported to the agency monthly.

 

Construction Account:

      Dr. Cr.  
  Due from Other Agency-OST (1354) .8 mil    
    Cash Revenues (3210) Revenue Source Code (0401) Investment Income   .8 mil  
 
85.85.50.a.(5)

To record an adjusting entry for construction in progress.  At a minimum, this entry should be made at fiscal year-end. Construction in progress is equal to the sum of construction expenditures ($10 million) and COI and UD($.3 million) less OIP ($.7 million).

 

General Capital Assets Subsidiary Account (Account 997):

      Dr. Cr.  
  Construction in Progress (2510) 9.6 mil    
    Investment in General Capital Assets (9850)   9.6 mil  
 
85.85.50.a.(6)

At fiscal year-end for reporting purposes, to reclassify as short-term that portion of principal due within the next fiscal year.  At fiscal year-end (based on the assumptions in 85.85.50.a.(7)), the amount in GL Code 5173 Certificates of Participation Payable should agree with the next year’s principal payment on the agency’s COP amortization schedule.

 

General Long-Term Obligations Subsidiary Account (Account 999):

      Dr. Cr.  
  Certificates of Participation Payable (5273) 2 mil    
    Certificates of Participation Payable  (5173)   2 mil  
 
85.85.50.a.(7)

In a subsequent period, assume that a debt service payment is scheduled:

  • Principal $2 million,
  • Interest expense $3.5 million, and
  • Total COP debt service payment $5.5 million.

Payment components:

  • $2 million is paid by OST from the remaining COP proceeds held by OST to cover interest incurred during the construction period,
  • $1.1 million is paid by OST from interest earned on COP proceeds held by OST during the construction period,
  • $2.4 million is paid in cash by the agency to OST, and
  • OST makes the full COP debt service payment of $5.5 million to the fiscal agent.

Refer to Subsection 85.85.50.c.(6).

 

Construction Account:

      Dr. Cr.  
 

Cash Expenditures/Expenses (6510) Subobject PD - Principal COP Lease-Purchase Agreements

2 mil    
  Cash Expenditures/Expenses (6510) Subobject PE - Interest COP Lease-Purchase Agreements 3.5 mil    
    Cash in Bank (1110) or In-Process (71XX)   2.4 mil  
    Due from Other Agency-OST (1354)   3.1 mil  
 

General Long-Term Obligations Subsidiary Account (Account 999):

      Dr. Cr.  
  Certificates of Participation Payable  (5173) 2 mil    
    Amount to be Provided for Retirement of Long-Term Obligations (1820)   2 mil  
 
85.85.50.b PROPRIETARY FUND TYPE ACCOUNTS (AGENCY ENTRIES)
 

The following example is used to illustrate entries for real estate certificates of participation (COP) in a budgeted proprietary fund type account. Refer to Subsection 85.72.40.c.

An agency operating in a budgeted proprietary fund type account obtains proper legislative approval for construction of a new state office building and applies to the Office of the State Treasurer (OST) for COP financing.  OST sells a COP.  Proceeds of the COP are used for to pay for construction costs and interest incurred during the construction period.

Details of the issue are:

  • Par amount of $73.6 million,
  • Original issue premium (OIP) of $.7 million,
  • Underwriter’s discount (UD) of $.2 million,
  • Costs of issuance (COI) of $.1 million,
  • COP proceeds for construction $60 million,
  • COP proceeds for interest costs $14 million, and
  • Net COP proceeds held by OST for the agency $74 million ($60 million for construction costs and $14 million for construction period interest).

Note: Original issue discount (OID) results when the par of the COP is more than the purchase price. An OIP results when the par of the COP is less than the purchase price.  Discounts that are related to underwriters’ fees are handled consistent with other issue costs. COI are generally included in the proceeds and paid separately. OST receives cash proceeds for the COI, but not for the UD and the OID. 

Details of the first year:

  • $10 million is expended on construction,
  • Debt service is $4 million, interest only, and
  • Unspent COP proceeds earn $.8 million in interest revenue.

This example assumes that net construction period interest is material and is therefore capitalized, and that the OIP is immaterial, and therefore expensed. UD and COI are always expensed as issuance costs.  (If the OIP had been deemed material, it would be deferred in GL Code 5920 “Unamortized Premiums on Certificates of Participation” and amortized over the life of the COP using GL 6512 “Amortization Expense” Subobject WB “Amortization”). 

Unspent proceeds are held by OST and invested in the Local Government Investment Pool (LGIP) or with a trustee.

Note: Construction period interest is not capitalized in internal service funds.

85.85.50.b.(1)

To record the liability for the real estate COP, and the original issue premium, underwriter’s discount, and the expense of the costs of issuance (paid by OST).  When the COP is sold by OST, it becomes an obligation (liability) of the agency, even if the cash proceeds have not yet been received by the agency.  The time period between the COP sale date and the closing date is generally two weeks or less.

 
 

Agency Operating/Construction Account:

      Dr. Cr.  
  Due from Other Agency-OST (1354) 74 mil    
    Cash Expenditures/Expenses (6510) Subobject PC – Other Debt Costs (UD + COI – OIP)*   .4 mil  
    Certificates of Participation Payable (5273) (Par)   73.6 mil  
 
*If the COP had an OID instead of an OIP, the OID amount would be added to the UD and COI.
 
  Note: Because interest only is due during the construction period, the entire obligation is initially coded long-term.
85.85.50.b.(2)

To record construction expenditures, reimbursement by OST, and elimination of budgeted expenditures.

 
 

Agency Operating/Construction Account:

      Dr. Cr.  
  Cash Expenditures/Expenses (6510) Object J - Capital Outlays 10 mil    
    Cash in Bank (1110) or In-Process (71XX)   10 mil  
 
  Cash in Bank (1110) or In-Process (71XX) 10 mil    
    Due from Other Agency-OST (1354)   10 mil  
 
  Construction in Progress (2510) 9.6 mil    
  Expense Adjustment/Elimination  (6525) Subobject PC – Other Debt Costs (UD + COI - OIP) .4 mil    
    Expense Adjustment/Elimination  (6525) Object J – Capital Outlays   10 mil  
 
85.85.50.b.(3)

To record interest earned on unspent COP proceeds held by OST and reported to the agency monthly.

 
 

Agency Operating/Construction Account:

      Dr. Cr.  
  Due from Other Agency-OST (1354) .8 mil    
    Construction in Progress (2510)   .8 mil  
 
85.85.50.b.(4) To record first year interest expense only debt service payment – this payment is made by OST from the proceeds held by OST to cover interest expense during the construction period.   
 
 

Agency Operating/Construction Account:

      Dr. Cr.  
  Construction in Progress (2510) 4 mil    
    Due from Other Agency-OST (1354)   4 mil  
 
 

Once the COP proceeds held by OST to cover interest expense during the construction period are expended, the interest payments will be paid by the agency to OST. 

Additionally, once construction is completed the interest payment is no longer capitalized. The interest payment is charged to interest expense in GL Code 6510 Cash Expenditures, Subobject PE - Interest COP Lease-Purchase Agreements.  Refer to Subsection 85.85.50.b(5).

85.85.50.b.(5)

At fiscal year-end for reporting purposes, to reclassify as short-term that portion of principal due within the next fiscal year.  At fiscal year-end (based on the assumptions in 85.85.50.b.(6)), the amount in GL Code 5173 should agree with the next year’s principal payment on the agency’s COP amortization schedule.

 
 

Agency Operating/Construction Account:

      Dr. Cr.  
  Certificates of Participation Payable (5273) 2 mil    
    Certificates of Participation Payable (5173)   2 mil  
 
85.85.50.b.(6)

In a subsequent period, assume that a debt service payment is scheduled:

  • Principal $2 million,
  • Interest expense $3.5 million, and
  • Total COP debt service payment $5.5 million.

Payment components:

  • $2 million is paid by OST from the remaining COP proceeds held by OST to cover interest incurred during the construction period,
  • $1.1 million is paid by OST from interest earned on the COP proceeds held by OST during the construction period,
  • $2.4 million is paid in cash by the agency to OST,
  • OST makes the full COP debt service payment of $5.5 million to the fiscal agent.

Refer to Subsection 85.85.50.c.(6).

 

Agency Operating/Construction Account:

      Dr. Cr.  
  Cash Expenditures/Expenses (6510) Subobject PD – Principal COP Lease-Purchase Agreements 2 mil    
  Cash Expenditures/Expenses (6510) Subobject PE -Interest COP Lease-Purchase Agreements 3.5 mil    
    Cash in Bank (1110) or In-Process (71XX)   2.4 mil  
    Due from Other Agency – OST (1354)   3.1 mil  
 
  Certificates of Participation Payable (5173) Principal 2 mil    
    Expense Adjustments/Elimination (6525) Subobject PD- Principal COP Lease-Purchase Agreements   2 mil  
 
85.85.50.c OFFICE OF THE STATE TREASURER (AGENCY 010) ENTRIES
 

Using the same example as in Subsection 85.85.50 a and b above, an agency obtains proper legislative approval for the construction of a new state office building and applies to the Office of the State Treasurer (OST) for COP financing.  OST sells a COP.  Proceeds of the COP are used to pay for construction costs and interest incurred during the construction period.

Details of the issue are:

  • Par amount of $73.6 million,
  • Original issue premium (OIP) of $.7 million,
  • Underwriter’s discount (UD) of $.2 million,
  • Costs of issuance (COI) of $.1 million,
  • COP proceeds for construction $60 million, and
  • COP proceeds for interest costs $14 million.

Note: Original issue discount (OID) results when the par of the COP is more than the purchase price.  OIP results when the par of the COP is less than the purchase price.  Discounts that are related to underwriters’ fees are handled consistent with other issue costs. COI are generally included in the proceeds and paid separately. OST receives cash proceeds for the COI, but not for the UD and the OID. 

Details of the first year:

  • $10 million is expended on construction,
  • Debt service is $4 million, interest expense only, and
  • Unspent COP proceeds earn $.8 million in interest revenue.

The entries for OST are as follows:

All entries are made to Account 739 (Certificates of Participation and Other Financing Account - State):

85.85.50.c.(1)

To record the closing of the COP sale with the underwriter, and investment of the proceeds in the LGIP.  OST receives cash for the construction proceeds, the interest expense due during construction, and the costs of issuance.

 

      Dr. Cr.  
  Receipts-In-Process (7110) (Par + OIP – UD) 74.1 mil    
    Due to Other Agency (5154)   74 mil  
    Cash Revenue (3210) Revenue Source Code (0499) Other Revenues (COI)   .1 mil  
 
  Investments with Local Government Investment Pool (1206) or Cash and Investments with Escrow Agents and Trustees (1140) 74 mil    
    In-Process (71XX)   74 mil  
 
85.85.50.c.(2) To record payment of costs of issuance.
 

      Dr. Cr.  
  Cash Expenditures/Expenses (6510) with the appropriate Subobject .1 mil    
    In-Process (71XX)   .1 mil  
 
85.85.50.c.(3) To record withdrawal from the LGIP (or trustee), and payment to the agency for construction costs incurred.
 

      Dr. Cr.  
  Receipts-In-Process (7110) 10 mil    
    Investments with Local Government Investment Pool (1206) or Cash and Investments with Escrow Agents and Trustees (1140)   10 mil  
           
 
  Due to Other Agency (5154) 10 mil    
    In-Process (71XX)   10 mil  
 
85.85.50.c.(4) To record interest earnings of $.8 million on unspent COP proceeds. 
 

      Dr. Cr.  
  Investments with LGIP (1206) .8 mil    
    Due to Other Agency (5154)   .8 mil  
 
85.85.50.c.(5) To record the first debt service payment made to the fiscal agent by the OST on behalf of the agency. This first payment is made from the amount held by OST to cover interest expense during the construction period.
 

      Dr. Cr.  
  In-Process (71XX) 4 mil    
    Investments with Local Government Investment Pool (1206) or Cash and Investments with Escrow Agents and Trustees (1140)   4 mil  
 
  Due to Other Agency (5154) 4 mil    
    Due to Fiscal Agent (5130)   4 mil  
 
  Due to Fiscal Agent (5130) 4 mil    
    In-Process (71XX)   4 mil  
 
85.85.50.c.(6)

To record debt service in a subsequent period. OST receives a cash payment from an agency of $2.4 million and uses the remaining COP proceeds held to cover interest expense during the construction period of $2 million and the accumulated interest earned on the COP proceeds held on deposit of $1.1 to pay the total debt service of $5.5 million. 

 

      Dr. Cr.  
  In-Process (71XX) 2.4 mil    
    Due to Fiscal Agent (5130)   2.4 mil  
 
  In-Process (71XX) 3.1 mil    
    Investments with LGIP (1206)   3.1 mil  
 
  Due to Other Agency (5154) 3.1 mil    
    Due to Fiscal Agent (5130)   3.1 mil  
 
  Due to Fiscal Agent (5130) 5.5 mil    
    In-Process (71XX)   5.5 mil  
 

85.85.52

June 1, 2013

Real Estate Certificates of Participation (COP) refunding
85.85.52.a GOVERNMENTAL FUND TYPE ACCOUNTS (AGENCY ENTRIES)
 

The following example is used to illustrate entries for an advance refunding of a real estate certificate of participation (COP) in a governmental fund type account. Refer to Section 85.72.40.f.

Details of the old (refunded) COP are:

  • Principal balance $250,000, and
  • Interest due $1,400

Details of the new (refunding) COP are:

  • Principal balance $239,000,
  • Original issue premium (OIP) $15,000,
  • Underwriter’s discount (UD) $1,600,
  • Costs of issuance (COI) $1,000, and
  • Total reacquisition price $251,400 ($239,000 + 15,000 – 1,600 – 1,000).
85.85.52.a.(1) To record the liability for the new (refunding) COP, the original issue premium, underwriter’s discount, and the expense of the costs of issuance (paid by OST), and the payment to the escrow agent bank.  When the new COP is sold by OST, it becomes an obligation of the agency.  An amount equal to the principal balance of the old (refunded) COP plus any interest due is sent to the escrow agent bank to refund the old COPs.  When the old COP is refunded, it is no longer an obligation of the agency and it is removed from Account 999.
 
 

Operating Account:

      Dr. Cr.  
  Cash Revenue (3210) Revenue Source Code (0850) Payments to Refunded COP Escrow Agents (par of old COPs + interest due on the old COPs)** 251,400    
  Cash Revenue (3210) Revenue Source Code (0852) Underwriter’s Discount/Costs of Issuance – Refunding COPs 2,600    
    Cash Revenue (3210) Revenue Source Code (0854) Proceeds of Refunding COPs   239,000  
    Cash Revenue (3210) Revenue Source Code (0853) Original Issue Premium – Refunding COPs*   15,000  
 
*If the COP had an Original Issue Discount (OID) instead of an OIP, Revenue Source Code 0851 “Original Issue Discount – Refunding COPs” would be debited.
 
**If this was a current refunding of a COP (instead of an advance refunding), the amount to be paid to the escrow agent would be recorded as an expenditure to subobject PA “Principal” and/or PB “Interest.”
 

General Long-Term Obligations Subsidiary Account (Account 999):

 
      Dr. Cr.  
  Certificates of Participation (5173/5273) 250,000    
    Amount to be Provided for Retirement of Long-Term Obligations (1820)   250,000  
 
  Amount to be Provided for Retirement of Long-Term Obligations (1820) 239,000    
    Certificates of Participation (5173/5273)   239,000  
 
85.85.52.b PROPRIETARY FUND TYPE ACCOUNTS (AGENCY ENTRIES)
 

The following example is used to illustrate entries for an advance refunding of a real estate certificate of participation (COP) in a proprietary fund type account.  Refer to Section 85.72.40.f.

Details of the old (refunded) COP issue are:

  • Principal balance $251,000 (5 years remaining),

Details of the new (refunding) COP are:

  • Principal balance $250,000 (10 years),
  • Original issue premium (OIP) $10,000 (assume material),
  • Underwriter’s discount (UD) $2,600,
  • Costs of issuance (COI) $2,400, and
  • Total reacquisition price $255,000 ($250,000 +10,000 -2,600 – 2,400)
 
85.85.52.b.(1) To record the new (refunding) COP, the removal of the old (refunded) COP, and the deferred amount on the COP refunding.
 
 

Operating/Construction Account:

      Dr. Cr.  
  COP (old) Payable (5173/5273) 251,000    
  Cash Expenditures/Expenses (6510) Subobject PC - Other Debt Costs (UD + COI)       5,000    
  Deferred Outflow on COP Refunding (1971)* 4,000    
    COP (new) payable (5173/5273)   250,000  
    Unamortized Premiums on COPs sold (5920)   10,000  
           
*If the deferred amount was a credit, it would be recorded to GL Code 5266 “Deferred Inflow on COP Refunding.”
           
85.85.52.b.(2) To record the annual amortization of the Deferred Outflow on the COP Refunding on a straight-line basis over 5 years (the remaining life of the old COP).
 
      Dr. Cr.  
  Amortization Expense (6512) Subobject WB 800    
    Deferred Outflow on COP Refunding (1971)   800  
 
85.85.52.b.(3) To record the annual amortization of the original issue premium (OIP) on a straight-line basis over 10 years (the life of the new COP).
 
      Dr. Cr.  
  Unamortized Premiums on COPs sold (5920) 1,000    
    Amortization Expense (6512) Subobject WB   1,000  
 

85.85.55

July 1, 2003

Vendor payment advances
 

To record vendor payment advance transactions. Refer to Subsection 85.74.10.

85.85.55.a

Initial Advance

85.85.55.a.(1) To record the issuance of a vendor payment advance to the State Board for Community and Technical Colleges (SBCTC) or an individual college.
 
 

General Fund (Account 001):

      Dr. Cr.  
  Due from Other Funds - Advances (1350) (with appropriate subsidiary) xxx    
    In-Process (71XX)   xxx  
 
85.85.55.a.(2) To record the deposit of the vendor payment advance by the SBCTC or an individual college.
 
 

Institutions of Higher Education - Agency Account (Account 840):

      Dr. Cr.  
  Cash in Bank (1110) xxx    
    Due to Other Funds - Advances (5150) (with appropriate subsidiary)   xxx  
 
85.85.55.b Payment for Goods and Services and the Expenditure Recognition
85.85.55.b.(1) To record the payment to a vendor by the SBCTC or an individual college with the advance.
 
 

Institutions of Higher Education - Agency Account (Account 840):

      Dr. Cr.  
  Due from Other Funds - Advances  (1350) (with appropriate subsidiary) xxx    
    Cash in Bank (1110)   xxx  
 
85.85.55.b.(2) To charge the General Fund for disbursements made from the vendor payment advance.
 
 

General Fund (Account 001):

      Dr. Cr.  
  Accrued Expenditures/Expenses (6505) xxx    
    Due to Other Funds – Advances (5150) (with appropriate subsidiary)   xxx  
 
85.85.55.c Reimbursement of Advance Account
85.85.55.c.(1) To record the reimbursement of the vendor payment advance.
 
 

General Fund (Account 001):

      Dr. Cr.  
  Due to Other Funds – Advances (5150) xxx    
    Accrued Expenditures/Expenses (6505)   xxx  
 
  Cash Expenditures/Expenses (6510) xxx    
    In-Process (71XX)   xxx  
 
85.85.55.c.(2) To record the deposit of reimbursement received by an individual college.
 
 

Institutions of Higher Education - Agency Account (Account 840):

      Dr. Cr.  
  Cash in Bank (1110) xxx    
    Due from Other Funds – Advances  (1350)   xxx  
 
85.85.55.d Close of Advance Account and Return Outstanding Balance - Early in New Biennium
85.85.55.d.(1) To close the vendor payment advance at the close of the biennium. Example assumes June expenditures against the advance were less the initial advance.
 
 

Institutions of Higher Education – Agency Account (Account 840):

      Dr. Cr.  
  Due to Other Funds – Advances  (5150) xxx*    
    Due from Other Funds – Advances  (1350)   xxx*  
 
  Due to Other Funds – Advances  (1350) xxx    
    Cash in Bank (1110)   xxx  
 
*Amount of the initial advance.
 
85.85.55.d.(2) To record the transmittal to the Office of the State Treasurer of the outstanding cash balance in the vendor payment advance.
 
 

General Fund (Account 001):

      Dr. Cr.  
  Receipts In-Process (7110) xxx    
    Due from Other Funds – Advances (1350)   xxx  
 

85.85.60

July 1, 2012

Retention of payments

 

To record entries related to payments on public works contracts including retained percentages. Refer to Subsection 85.74.20.

85.85.60.a

Payment to Contractor

To record the amount paid to the contractor on a progress billing.
 
 
      Dr. Cr.  
  Cash Expenditures/Expenses (6510) xxx    
   

In-Process (71XX) or
Cash in Bank (1110)

  xxx  
 
85.85.60.b

Retained in State Account

To record the amount retained by the state, in a treasury/treasury trust or local account, from a progress billing.

 
 
      Dr. Cr.  
  Cash Expenditures/Expenses (6510) xxx    
    Retained Percentages Payable (5116)   xxx  
 
85.85.60.c

Payment of Amounts Retained in State Account

To record the payment of amounts retained by the state in a treasury/treasury trust or local account.

 
 
      Dr. Cr.  
  Retained Percentages Payable (5116) xxx    
   

In-Process (71XX) or
Cash in Bank (1110)

  xxx  
 
85.85.60.d

Retained in Escrow or Interest Bearing Account

To record the amount of retained percentages placed in escrow or in an interest bearing account from a progress billing.

 
 
      Dr. Cr.  
  Cash Expenditures/Expenses (6510) xxx    
    In-Process (71XX) or
Cash in Bank (1110)
  xxx  
 
  Cash and Investments with Escrow Agents and Trustees (1140) xxx    
    Retained Percentages Payable (5116)   xxx  
 
85.85.60.e

Payment of Amounts Retained in Escrow or an Interest Bearing Account

To record the payment of amounts retained in escrow or in an interest bearing account.

 
 
      Dr. Cr.  
  Retained Percentages Payable (5116) xxx    
    Cash and Investments with Escrow Agents and Trustees (1140)   xxx  
 

85.85.65

July 1, 2001

Claims and judgments

 

This illustrative entry of a claims liability displays the accrual of a dispute with the federal government over questioned program costs when it is probable that the state will be required to refund federal revenue.  Refer to Subsection 85.74.40.

Note: The second entry is made to reverse activity previously coded as federal, which is now supported by state funds.
 
 
      Dr. Cr.  
  Cash Revenues (3210) Federal Source Code (03XX) xxx    
    Claims and Judgments Payable (5113)   xxx  
 
  Cash Expenditures/Expenses (6510) Subobject (XX) (using a state appropriation) xxx    
    Cash Expenditures/Expenses (6510) Subobject (XX) (using a federal appropriation)   xxx  
 

Click here if you would like to print a PDF Version of this document.


Return to CHAPTER 85