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CITY OF GENT LAKE, MINNESOTA <br />NOTES TO BASIC FINANCIAL STATEMENTS <br />DECEMBER 31, 2008 <br />NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) <br />J. Capital Assets (Continued) <br />Depreciation on exhaustible assets is recorded as an allocated expense in the <br />Statement of Activities with accumulated depreciation reflected in the. Statement of Net <br />Assets. Since surplus assets are sold for an immaterial amount when declared as no <br />longer needed for City purposes, no salvage value is taken into consideration for <br />depreciation purposes. Capital assets not being depreciated include construction in <br />progress. <br />Depreciation Estimated <br />Assets Method Useful Life <br />Buildings Straight -Line 40`Years <br />Office Equipment Straight -Line 5 - 10 Years <br />Utility Systems Straight -Line 20 - 50. Years <br />Infrastructure Straight -Line 20 - 50 Years <br />K. Long -Term Obligations <br />In the entity -wide financial statements, long-term debt and other long-term obligations. <br />are reported as liabilities in the applicable governmental activities. Bond premiums and <br />discounts are deferred and amortized over the life of the bonds using the straight-line <br />method. Bond issue costs, if material, are reported as prepaid items and amortized over <br />the term of the related debt using the straight-line method. <br />In the governmental fund financial statements, bond premiums and discounts, as well as <br />bond issue costs are recognized during the current period. The face amount of the debt <br />issue is reported as on other financing source. Premiums received on debt issuances <br />are reported as other financing sources while discounts are reported as other financing <br />uses. Issue costs are reported as debt service expenditures. <br />L. Fund Balance <br />In the governmental fund financial statements, reservations of fund balance represent <br />those portions of fund balance not appropriable for expenditure or legally restricted by <br />outside parties for use for a specific purpose. Designated fund balances represent <br />tentative plans for future use of financial resources that are subject to change. <br />(20) <br />