Sue City has outstanding $5 million in general obligation term bonds used to finance the construction of the new City Library.Sue City has a June 30 fiscal year-end.Interest at 6 percent is payable each January 1 and July 1.The principal of the bonds is due 10 years in the future.The city budgeted the July 1,2015 interest payment in the budget for the fiscal year ended June 30,2015.On June 30,cash was transferred from the general fund to the debt service fund to make the required payment.The maximum amount of interest payable that may be included on the balance sheet of the debt service fund of Sue City at June 30 is

Question

Quizplus · Accepted Answer

The maximum amount of interest payable that may be included on the balance sheet of the debt service fund of Sue City at June 30 is $150,000 (6% of $5 million). This is because the interest payment due on July 1, 2015, was included in the budget for the fiscal year ended June 30, 2015, and cash was transferred from the general fund to the debt service fund to make the required payment. Therefore, the amount of interest payable accrued as of June 30, 2015, would be the amount due on July 1, 2015, which is $150,000. The principal amount of the bonds is not due until 10 years in the future and is not a factor in determining the maximum amount of interest payable.

Sue City Has Outstanding $5 Million in General Obligation Term