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CITY OF GEM 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 -Aictivities 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-10:Years <br />Utility Systems Straight -Line 20.: 5Q Years <br />Infrastructure Straight -Line go- 50.Years <br />K. Long -Term Obligations: <br />r hT the entity -wide financial statements, long-term debt and other long-term obligations <br />-are reported as liabilitiesJ4 the applicable governmentafactivities: 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 arid .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 arnount*-of the debt, <br />issue is reported as on -otheer financing source. Pre* rriiurrls. received-on.debt issuances <br />are reported as other financing. sources.*while-.discounts are reported.as other financing <br />uses. Issue costs are repotted as debt service expenditures. <br />L. Fund Balance <br />In the .governmental fund financial statements, teservations of fund. balance represent <br />those -portions of fund balance not appropriable for -expenditure or legally restricted by <br />outside parties fipr 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 />