Barnes Company purchased $62,000 of 11.0% bonds at par. The bonds mature in six years and are classified as a held-to-maturity security. Which of the following is the correct journal entry to record the receipt of the usual semiannual interest payment?

(A) debt Cash, $4,715; credit Long-Term Investments-HTM, $4,715.

(B) debit Cash, $9,430; credit Long-Term Investments-HTM, $9,430.

(C) debit Cash, $4,715; credit Interest Revenue, $4,715.

(D) debit Cash, $9,430; credit Unrealized Gain-Equity, $9,430.

(E) debit Unrealized Gain-Equity, $4,715; credit Cash, $4,715.

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6 June, 15:55

Barnes Company purchased $62,000 of 11.0% bonds at par. The bonds mature in six years and are classified as a held-to-maturity security. Which of the following is the correct journal entry to record the receipt of the usual semiannual interest payment?

(A) debt Cash, $4,715; credit Long-Term Investments-HTM, $4,715.

(B) debit Cash, $9,430; credit Long-Term Investments-HTM, $9,430.

(C) debit Cash, $4,715; credit Interest Revenue, $4,715.

(D) debit Cash, $9,430; credit Unrealized Gain-Equity, $9,430.

(E) debit Unrealized Gain-Equity, $4,715; credit Cash, $4,715.

+1

Answers (1)

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Brody Jordan · Answer 1

Given that,

Value of bonds purchased = $62,000

Interest rate = 11 percent

Bonds are issued at par.

Interest Amount = Value of bonds purchased * (Interest rate : 2)

= $62,000 * (11% : 2)

= $62,000 * 5.5%

= $3,410

Therefore, the journal entry is as follows:

Cash A/c Dr. $3,410

To interest revenue A/c $3,410

(To record the receipt of the usual semiannual interest payment)