Asked by
Mohamed Samir
on Nov 18, 2024
Verified
Ruben Company purchased $100,000 of Evans Company bonds at 100 plus $1,500 in accrued interest. The bond interest rate is 8% and interest is paid semiannually. The journal entry to record the receipt of interest on the next interest payment date would be
A) debit Cash, $4,000; credit Interest Revenue, $4,000
B) debit Cash, $4,000; credit Interest Receivable, $4,000
C) debit Cash, $4,000; credit Interest Receivable, $1,500, and Interest Revenue, $2,500
D) debit Cash, $2,500; credit Interest Revenue, $2,500
Accrued Interest
Interest that has been incurred but not yet paid, accumulating on loans or bonds over time until payment is made.
Interest Receivable
The amount of interest that has been earned but not yet received in cash.
- Master the nuances of accounting for investments in bonds, from the purchase phase to the recognition of interest revenue and the execution of sales.
- Understand the treatment of dividends and interest revenue in investment accounting.
Verified Answer
KR
Learning Objectives
- Master the nuances of accounting for investments in bonds, from the purchase phase to the recognition of interest revenue and the execution of sales.
- Understand the treatment of dividends and interest revenue in investment accounting.