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NOTE. 1 <br />CITY OF GEM LAKE, MINNESOTA <br />NOTES TO BASIC FINANCIAL STATEMENTS <br />DE.CEM13ER 31, 2010 <br />SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) <br />J. Capital Assets (Continued) <br />Depreciation on exhaustible assets is recorded as am allocated expense in the statement <br />of activities with accumulated depreciation reflected in the statement of net assets. Since <br />surplus assets are sold for an immaterial amount when declared as no longer need ed. for <br />City purposes, no salvage value is taken into consideration for depreciation purposes. <br />Capital assets not being depreciated include construction in progress. <br />Depreciation <br />Estimated <br />Assets <br />Method <br />Useful Life <br />Buildings <br />Straightm.Line <br />40 Years <br />Office Equipment <br />straight -Line <br />5 -10 Years <br />Utility Systems <br />straight -Line <br />20 - 50 Years <br />Infrastructure <br />Straight -Line <br />'20 - 50 Years <br />K. Lang -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. Band 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. 0overnmental 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 />