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 expense should the city recognize in its governmental activities journal for the years 2020 and 2021?

Question

Business

Elian Espinoza

20 December, 20:51

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 expense should the city recognize in its governmental activities journal for the years 2020 and 2021?

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Scooter · Answer 1

Amount paid in 2020 = $0

Amount paid in 2021 = $60,000

Explanation:

Given:

Bond price = $1,000,000

Interest rate = 6%

1. Bond was issued on October 1, 2020, and interest will be payable on April 1 and October 1. So in the year 2020, there is no chance for payment.

Total payment for year 2020 = $0

2. In the year 2021 April, 1 and October 1 will come and the company made payment.

Total payment for year 2021 is:

Total payment for year 2021 = $1,000,000 * 6%

Total payment for year 2021 = $60,000