A Water Enterprise Fund (EF)issues $4 million of 5% revenue bonds on October 1,2013.The EF will make its first payment of interest on March 31,2014,together with a principal payment of $200,000.What amount,if any,should the EF report in its fund statement of revenues,expenses,and changes in net position for the year ended December 31,2013?

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Quizplus · Accepted Answer

The interest expense for the year ended December 31, 2013, would be calculated from October 1, 2013, to December 31, 2013, which is 3 months. The annual interest on $4 million at 5% is $200,000, so for 3 months, it would be $50,000. Principal payments do not affect the statement of revenues, expenses, and changes in net position; they are reported in the statement of net position. Therefore, only the interest expense of $50,000 is reported for 2013.

A Water Enterprise Fund (EF)issues $4 Million of 5% Revenue