The City of Spartan's fiscal year ends on December 31. On October 1, 2020, the city issued $1,000,000 of 6%, 10-year term bonds with semiannual interest payments due on April 1 and October 1 each year, beginning on April 1, 2021. What amount of expenditures should the city recognize in its debt service fund for the years 2020 and 2021?

Question

Quizplus · Accepted Answer

The city should not recognize any expenditures related to the bond issuance in 2020 because the bonds were not outstanding until October 1. Therefore, the city should recognize $60,000 of interest expenditure in the debt service fund for 2021 (two semiannual interest payments of $30,000 each).

The City of Spartan's Fiscal Year Ends on December 31