The city issues $100,000 in general obligation bonds on April 1, 2024, and the first principal payment

of $10,000 is due on March 31, 2025. The interest rate is 5% annually on the unpaid principal

balance.

As of April 1, 2024, the full $100,000 is outstanding. For the full fiscal year (April 1, 2024 to March 31,

2025), interest accrues on the full amount until payment is made. The interest on $100,000 for one

year at 5% =

Interest Expense = $100,000 × 5% = $5,000

Note: Interest is typically calculated on the beginning-of-period balance, and since the payment is

made at the end of the year (March 31, 2025), the full $5,000 interest is recognized for that year.

Relevant Standards and Reference:

GASB Statement No. 34, Basic Financial Statements for State and Local Governments

GASB Codification Section 2200 (Government-Wide Financial Statements)

GFOA Guidance on Long-Term Debt Accounting