Question

On March 2, Year 1, Finch City issued 10-year general obligation bonds at face amount, with interest payable March 1 and September 1. The proceeds were to be used to finance the construction of a civic center over the period April 1, Year 1, to March 31, Year 2. During the fiscal year ended June 30, Year 1, no resources had been provided to the debt service fund for the payment of principal and interest. On June 30, Year 1, Finch's debt service fund should include interest payable on the general obligation bonds for: Group of answer choices 4 months. 3 months. 6 months. 0 months.

Answer 1

Answer:

4 months.

Explanation:

This is because the months for which interest have been accrued are March, April, May, and June of year 1. These are 4 months in total.

Therefore, Finch's debt service fund should include interest payable on the general obligation bonds for 4 months.

Answer 2

Answer:

0 months.

Explanation:

The Finch City issued 10 year general obligation bond. The interest obligation will fall due on 1st September. On 30th June no interest obligation will be recorded. The debt service fund uses modified accrual basis accounting system in which interest will fall due when its time for legally due. Interest payable is only displayed in financial statement on 30 June.