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

question 55

Multiple Choice

The City 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 expenditures should the city recognize in its debt service fund for the years 2017 and 2018?

• A) $60,000 in 2017; $60,000 in 2018.
• B) $30,000 in 2017; $60,000 in 2018.
• C) $15,000 in 2017; $6,000 in 2018.
• D) $0 in 2017; $60,000 in 2018.

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Definitions:

Bank Statement

A document provided by a bank, summarizing the transactions that occurred in an account over a period.

Accrual Accounting

An accounting method that records revenues and expenses when they are earned or incurred, regardless of when the cash transaction occurs.

Interest Expense

This is the cost incurred by an entity for borrowed funds, reflected as a line-item expense in the income statement.

Income Statement

A financial statement that shows a company’s revenue and expenses over a specified period of time, resulting in net profit or loss.