Statement Of Net Position Of A Midsized City Reports 1

Statement Of Net Position Of A Midsized City Reports

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Statement Of Net Position Of A Midsized City Reports

Question Description

The statement of net position (i.e., a balance sheet) of a midsized city reports outstanding debt of $1,200,000,000. The city has a population of 800,000. The city is about to adopt the provisions of a new GASB pronouncement that changes the way defined benefit pension plans are accounted for and report-ed. A defined benefit pension plan promises employees a certain amount of income after they retire. The payments to the retirees are dependent on their last years’ salary and the number of years that they have been employed.

Per the new rules the city will have to report on its balance sheet an additional $600.000,000 of pension liabilities. Such an amount was previously reported in the notes to the financial statements but was not ac-corded accounting recognition on the balance sheet itself. The new accounting rules affect only the Way the pension obligation is reported; they have no effect on the actual promises made to current employees or those already retired.

1. Compute the city’s per capita debt (as reported on the statement of net position) prior to the adoption of the new accounting rules.
2. Compute the city’s per capita debt after the city adopts the new accounting rules.
3. In an editorial, the local newspaper wrote, “By increasing per capita debt by more 50 percent. the new rules put the city in a precarious fiscal position. Almost certainly the bond rating agencies will take notice and lower the city’s bond rating, thereby causing interest rates on any new debt that the city issues to increase significantly?’ that the change in accounting principles will cause the
4. Do you agree with the newspaper editorial  city’s fiscal position to deteriorate? Explain.
5. If you were an analyst with the agency that rated the city’s bonds, would the change in accounting principle cause you to lower the city’s credit rating? Explain.

RUBRIC
Excellent Quality 95-100%	Introduction 45-41 points The background and significance of the problem and a clear statement of the research purpose is provided. The search history is mentioned.		Literature Support 91-84  points The background and significance of the problem and a clear statement of the research purpose is provided. The search history is mentioned.			Methodology 58-53 points Content is well-organized with headings for each slide and bulleted lists to group related material as needed. Use of font, color, graphics, effects, etc. to enhance readability and presentation content is excellent. Length requirements of 10 slides/pages or less is met.
Average Score 50-85%	40-38 points More depth/detail for the background and significance is needed, or the research detail is not clear. No search history information is provided.		83-76  points Review of relevant theoretical literature is evident, but there is little integration of studies into concepts related to problem. Review is partially focused and organized. Supporting and opposing research are included. Summary of information presented is included. Conclusion may not contain a biblical integration.			52-49  points Content is somewhat organized, but no structure is apparent. The use of font, color, graphics, effects, etc. is occasionally detracting to the presentation content. Length requirements may not be met.
Poor Quality 0-45%	37-1 points The background and/or significance are missing. No search history information is provided.		75-1 points Review of relevant theoretical literature is evident, but there is no integration of studies into concepts related to problem. Review is partially focused and organized. Supporting and opposing research are not included in the summary of information presented. Conclusion does not contain a biblical integration.			48-1 points There is no clear or logical organizational structure. No logical sequence is apparent. The use of font, color, graphics, effects etc. is often detracting to the presentation content. Length requirements may not be met
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