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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.
-What entry would be made on June 30 related to this transfer?
A)Debit Interest payable; Credit Cash.
B)Debit Interest payable; Credit Cash with fiscal agent.
C)Debit Expenditure; Credit Cash with fiscal agent.
D)No entry required.

Question

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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.
-What entry would be made on June 30 related to this transfer?
A)Debit Interest payable; Credit Cash.
B)Debit Interest payable; Credit Cash with fiscal agent.
C)Debit Expenditure; Credit Cash with fiscal agent.
D)No entry required.

Quizplus · Accepted Answer

The transfer of cash to the fiscal agent is a payment for interest due to bondholders, which is recorded as an expense and reduces the liability for interest payable. Therefore, the entry would be to debit Interest payable and credit Cash with fiscal agent to reflect the payment made through the fiscal agent.

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