A city has a December 31 fiscal-year end and intended to sell bonds with a face amount of $10,000,000 and a three percent interest rate on April 1.Unfortunately, the bonds were not sold until four months later on August 1. The bonds were sold at their face amount. The bonds pay interest every six months with the first interest payment due on October 1.

How much should be reported as Expenditures--interest in the Debt Service Fund on December 31 of the year that the bonds were issued?

a. $120,000

b. $20,000

c. $50,000

d. $90,000