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The bonds pay interest September1 and March1. What amount of interest expense and
bond interest payable should Wag report in its government-wide financial statements at the close of the
fiscal year on December31?
a. Interest expense, $50,000; interest payable, $20,000.
b. Interest expense, $50,000; interest payable, $0.
c. Interest expense, $60,000; interest payable, $10,000.
d. Interest expense, $30,000; interest payable, $0.
Interest Expense for10 months from March to December would be $50,000/- (i.e $1,000,000 *6% *10/12).
Interest Payable would be for four months from September to December $20,000/- (assuming the company fully paid the interest due on1st September).
So 'a' is the right answer.
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