Chapter 16, Problem 22P

The City of Dylan issues a 10-year bond payable of $1 million at face value on the first day of Year 1. Debt issuance costs of $10,000 are paid on that day. For government-wide financial statements, how is this debt issuance cost reported?

1. a. $1,000 is recorded as an expense and $9,000 is recorded as an asset.
2. b. $1,000 is recorded as an expense and $9,000 is recorded as a deferred outflow of resources.
3. c. $10,000 is recorded as an expense.
4. d. $10,000 is recorded as an asset.