Use the Following Information to Answer Question

Use the following information to answer question
Due to changes in the prevailing interest rates, Washington County has decided to issue new 5% bonds and place the proceeds with a trustee in a manner structured to satisfy all the GASB requirements for an in-substance defeasance of an existing 6.5% bond issue.The 6.5% bonds were originally issued to fund highway projects and the debt is reported in the Schedule of Long-term Obligations and in the governmental activities column of the government-wide financial statements.The old 6.5% bonds are still actively traded in the bond market and will be until their maturity.The new 5% bonds will be sold to an institutional buyer who may also sell them in the bond market.
-Which bonds should be recognized in the Schedule of Long-Term Obligations?

A) Neither the 6.5% nor the 5% bonds.
B) Both the 6.5% bonds and the 5% bonds.
C) Only the 6.5% bonds.
D) Only the 5% bonds.

Correct Answer:

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