Question

of Spartan's fiscal year ends on December 31. On October 1, 2017, the city issued $1,000,000 of 6%, 10-year term bonds with semi-annual interest payments due on March 1 and October 1 each year, beginning on April 1, 2018. What amount of expense should the city recognize in its governmental activities journal for the years 2017 and 2018?

Answer 1

Answer:

$0 in 2017

and $60,000 in 2018

Explanation:

In 2017 the bond is issued after on October 1, 2017, No expnses was accrued so, there will be no expense in 2017.

In 2018 the expense of $30,000 is accrued on March 1 and October 1 .

Interest Expense = 1,000,000 x 6% x 6/12 = $30,000

Total Expense  = March 1, 2018  + October 1, 2018 = $30,000 + $30,000 = $60,000