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Several years ago, the City of Russell issued $7 million of 6% serial bonds at 101.Principal payments of $350,000 are due each June 30 for 20 years.Interest on the bonds is payable each December 31 and June 30.As of June 30, 2011, the City has not paid the June 30 principal and interest payment.
-The amount of interest payable assuming an outstanding balance of $4,000,000 of bonds that would be included on the balance sheet for the debt service fund of the City of Russell at June 30, 2011 would be
A)$ -0-.
B)$168,000.
C)$210,000.
D)$420,000.

Question

Use the following information to answer questions 
Several years ago, the City of Russell issued $7 million of 6% serial bonds at 101.Principal payments of $350,000 are due each June 30 for 20 years.Interest on the bonds is payable each December 31 and June 30.As of June 30, 2011, the City has not paid the June 30 principal and interest payment.
-The amount of interest payable assuming an outstanding balance of $4,000,000 of bonds that would be included on the balance sheet for the debt service fund of the City of Russell at June 30, 2011 would be
A)$ -0-.
B)$168,000.
C)$210,000.
D)$420,000.

Quizplus · Accepted Answer

The interest payable on June 30, 2011, would be calculated as 6% of the outstanding balance of $4,000,000 for half a year (since interest is paid semi-annually), which equals $120,000. However, since the principal payment of $350,000 is also due, the total amount payable would be $120,000 + $48,000 (interest on the $350,000 for half a year), totaling $168,000.

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