A city invests $500,000 of its idle General Fund cash in a certificate of deposit (CD) on August 1, 2019. The CD pays interest of 1 percent per annum and matures on January 31, 2020. When it closes its books on December 31, 2019, how much interest receivable should the city accrue?

Question

Quizplus · Accepted Answer

Interest on short-term investments is accrued in governmental-type funds assuming that it is considered available at the government's fiscal year-end. The CD is coming due only one month after the city's fiscal year-end and would be considered available to the government. The interest receivable would be $2,083 ($500,000 x 0.01 x 5/12).

A City Invests $500,000 of Its Idle General Fund Cash