Question

On March 2, 2020, 20-year, 6 percent, general obligation serial bonds were issued by Mossy County at the face amount of $3,000,000. Interest of 6 percent per year is due semiannually on March 1 and September 1. The first principal payment of $150,000 is due on March 1, 2021. The county’s fiscal year-end is December 31. What amounts are reported as interest expense in the government-wide financial statements and interest expenditure in the debt service fund for 2020?

Answer 1

Answer:

$150,000; $90,000

Explanation:

Interest Expenses for the year 2020 reported in the government-wide financial statements:

= Face Value × 6% × for 10 months

= $3,000,000 × 6% × 10/12

= $150,000

Interest Expenditure are to be reported in Debt Service Fund for 2020 is the actual amount paid on September 1:

= Face Value × 6% × ½ Semi annual interest

= $3,000,000 × 6% × ½

= $90,000