Question

The City of Spartan's fiscal year ends on December 31. On October 1, 2017, the city issued $1,000,000 of 6%, 10-year term bonds with semi-annual interest payments due on March 1 and October 1 each year, beginning on April 1, 2018. What amount of expenditures should the city recognize in its debt service fund for the years 2017 and 2018?

Answer 1

Answer: 10 in 2017 ; $ 60,000 in 2018. Explanations? The amount of interest that off's paying for each year on the bonds needs to be recognized in the debt service fond In 2017 there was no payment made on the bond and enest, because they were eissued on Oct. 1. so the answer is $0 in 2017. in 2018 there were two bond payments made. The annual interest is 6%, so the to fall interest to be recorded as an expenditure far the year is = ($1000,000 X 60%) = $60,000 The answere is $60,000 in 2018? 1 Therefore, the amount of expenditures should the city recognize ein od elebt service fund for the year 2017 and 2018 is fo and $ 60,000.