A government has $3,000,000 of 6%, 10-year general obligation bonds outstanding. The bonds were issued on July 2, 20X7 to finance construction of a general capital asset. Interest is payable semiannually on January 1 and July 1. What is the maximum amount of interest expenditures that the government would be permitted to report on the bonds for the year ended December 31, 20X7?

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The bonds have a 6% annual interest rate, so the annual interest is $180,000 ($3,000,000 * 6%). Since interest is payable semiannually, the government would pay $90,000 every six months. For the year ended December 31, 20X7, the government would have made one interest payment on January 1, 20X8, for the period from July 2, 20X7, to December 31, 20X7, totaling $90,000.

A Government Has $3,000,000 of 6%, 10-Year General Obligation Bonds