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 should be made on July 1 related to the interest payment?
A) No entry required.

B) Debit Interest payable; Credit Cash.
C) Debit Interest payable; Credit Cash with fiscal agent.
D) Debit Expenditure; Credit Cash with fiscal agent.

Question

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 should be made on July 1 related to the interest payment?
A) No entry required.

B) Debit Interest payable; Credit Cash.
C) Debit Interest payable; Credit Cash with fiscal agent.
D) Debit Expenditure; Credit Cash with fiscal agent.

Quizplus · Accepted Answer

Interest payments typically involve reducing a liability (Interest Payable) and decreasing an asset (Cash). This entry reflects the payment of interest that has accrued and is now being paid, reducing the liability and the cash asset.

Lewis County Uses a Fiscal Agent to Distribute Payments of Interest