Use the following information to answer questions
Lewis County uses a fiscal agent to distribute payments of interest to bondholders.Interest payments are due on July 1 of each year.The fiscal agent requires the County to transfer by June 20 the cash necessary to make the July 1 payments.
-How would Lewis County account for the amount transferred on June 20 if the County maintains its books and records in a manner that facilitates the preparation of the fund financial statements?
A)Debit Cash with fiscal agent and expenditures; Credit Cash and interest payable.
B)Debit Cash with fiscal agent and interest expense; Credit Cash and interest payable.
C)Debit Expenditures; Credit Cash.
D)Debit Cash with fiscal agent; Credit Cash.

Question

Use the following information to answer questions 
Lewis County uses a fiscal agent to distribute payments of interest to bondholders.Interest payments are due on July 1 of each year.The fiscal agent requires the County to transfer by June 20 the cash necessary to make the July 1 payments.
-How would Lewis County account for the amount transferred on June 20 if the County maintains its books and records in a manner that facilitates the preparation of the fund financial statements?
A)Debit Cash with fiscal agent and expenditures; Credit Cash and interest payable.
B)Debit Cash with fiscal agent and interest expense; Credit Cash and interest payable.
C)Debit Expenditures; Credit Cash.
D)Debit Cash with fiscal agent; Credit Cash.

Quizplus · Accepted Answer

The transfer of cash on June 20 is to pay interest to bondholders on July 1, which is an interest expense for the County. Therefore, the County should debit Cash with fiscal agent and interest expense, and credit Cash and interest payable. Option A would be incorrect as it includes debiting expenditures, which is not necessary for this transaction. Option C would also not be correct as it only accounts for the cash transfer without recognizing the purpose of the transfer. Option D only accounts for the transfer of cash and does not recognize the interest expense.

Use the Following Information to Answer Questions