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NOTE 1 <br />CITY OF GEM LAKE, MINNESOTA <br />NOTES TO BASIC FINANCIAL STATEMENTS <br />DECEMBER 31, 2011 <br />SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) <br />J. Capital Assets (Continued) <br />Depreciation on exhaustible assets is recorded as an 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 needed 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 />Straight -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. 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 />(20) <br />