Question

Excel City has $1,000,000 of 8%, 10 year general obligation bonds outstanding. The bonds were issued on October 1, 20x8 to finance construction of city park improvements. Interest is payable semiannually on October 1 and April 1. The bonds also require an annual principal payment of $100,000 each April 1. What amount of debt service expenditures should the government report in its Debt Service Fund for the year ended December 31, 20x9?

Answer 1

Amount of debt service expenditures should the government report in its Debt Service Fund for the year ended December 31, 20x9 is $176,000

Explanation:

The Debt Service Fund recognises both interest expenses and main expenditures.

Debt service expenses are not normally accrued at the end of the year, but are recorded as debts.

In 20x9 the Debt Service Fund paid a total of $176,000-$40,000

Interest and $100,000 principal on April 1 (both Expenditures of the fund) and $36,000 interest on October 1.