New York Codes, Rules and Regulations › Title 9 - EXECUTIVE DEPARTMENT › Subtitle S - Division of Housing and Community Renewal › Chapter III - Low Rent Housing › Subchapter D - Accounting Manual For Public Housing Agencies › Part 1645 - Investments › Subpart 1645-2 - Accounting For Investments › Section 1645-2.7 - Investments in U. S. series G and series K bonds

Current through Register Vol. 46, No. 28, July 10, 2024
(a) Investments in U. S. series G and K bonds
						differ from series F and series J bonds in that the G and K bonds are issued at
						par whereas the F and J bonds are issued at a discount. Series G bonds bear
						interest at the rate of 2.50 per cent on the par value, payable semiannually by
						check to the registered owner. Series G bonds were issued until April 1952, at
						which time the U. S. Treasury replaced them by series K bonds. Series K bonds
						bear interest at the rate of 2.76 per cent on the par value, payable
						semiannually by check to the registered owner. Series G and K bonds resemble
						series F and J bonds in that they are registered, are not bought and sold in
						the open market, but are issued and redeemed directly by the U. S. government
						through authorized agencies, and may be redeemed prior to maturity, in
						accordance with a table of redemption values printed on the bond. The
						redemption values decrease from par in the first five years from issue date and
						increase thereafter until they reach par again when the bonds mature. The
						changes in redemption values are not continuous, but occur at the end of each
						six-month period beginning with the date of issue. The date of issue for series
						F, G, J and series K bonds is always the first day of the month in which the
						bonds were purchased and the date of maturity is 12 years from the date of
						issue.
(b) When the bonds are
						purchased, the appropriate investment account should be charged with the
						purchase price, which in all cases will be par, or face, value. At the end of
						each six-month period, counting from the date of issue, account 1144, Accrued
						Interest Receivable on Investments, is charged with the nominal amount of the
						interest, that is, at the rate of two and one-half per cent per annum for
						series G and 2.76 per cent for series K on the par, or face, value of the
						bonds. During the period when the redemption value of the bonds is decreasing,
						the applicable investment account is credited with the decrease in redemption
						value and the difference between the nominal amount of the interest and the
						decrease in the redemption value is credited to the appropriate interest earned
						account. Six months from date of issue a $1,000 series G bond has a redemption
						value of $988. For bonds issued May 1, 1947 and purchased out of reserve funds,
						the journal entry on October 31, 1947 would be:
Entry (4):
Debit: Account 1144, Accrued Interest Receivable
									 on Investments
$12.50
Credit: Account 1176, Reserve Fund
									 Investments
$12.00
Credit: Account 2511, Interest Earned on Reserve
									 Fund Investments
$.50
Explanation::
To record interest accrued on U. S. series G bond,
						  issued May 1, 1947, for the six months ending October 31,
						  1947.
(c) During the period
						when the redemption value of the bond is increasing, the appropriate investment
						account is charged with the increase in the redemption value the nominal
						interest is charged to account 1144, Accrued Interest Receivable on
						Investments, and the appropriate interest earned account is credited with the
						sum of the nominal interest and the increase in the redemption value. For
						example, a $1,000 par value U. S. series G bond has a redemption value of $961
						at the end of seven years from date of issue, and of $964, at the end of seven
						and one-half years. The journal entry recording the interest accrued at the end
						of seven and one-half years, for a reserve fund investment would be:
Entry (5):
Debit: Account 1144, Accrued Interest Receivable
									 on Investments
$12.50
Debit: Account 1176, Reserve Fund
									 Investments
$3.00
Credit: Account 2511, Interest Earned on Reserve
									 Fund Investments
$15.50
Explanation::
To record interest accrued on U. S. series G bond
						  issued May 1, 1947, for the six months ending October 31,
						  1954.
(d) The semiannual
						payments of interest, when received, are credited to account 1144, Accrued
						Interest Receivable on Investments, and the proceeds, when the bonds are
						redeemed, or mature are credited to the appropriate investment account through
						the cash receipts register. Series G and K bonds, like series F and J are
						suitable only for long term investments, such as of replacement reserve funds.
						The amount of series F, G, J or series K bonds or the combined aggregate amount
						of both series that may be issued during any one calendar year to any one owner
						is limited to $100,000 (issue price). Inasmuch as the book value of investments
						in series F, G, J and K bonds will always be the same as the redemption value,
						no gain or loss will arise on redemption of the bonds prior to
						maturity.