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5 April, 03:33

On January 1, 2020, Sheffield Company purchased at face value, a $1230, 10% bond that pays interest on January 1. Sheffield Company has a calendar year end. The adjusting entry on December 31, 2020, is:

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  1. 5 April, 03:45
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    Dr Interest receivable 123

    Cr Interest revenue 123

    Explanation:

    Since Sheffield Company purchased the bonds at face value, all they need to report is accrued interest receivable. Since the interest is paid on January 1, they already have earned a year worth of interest.

    Dr Interest receivable 123 ( = $1,230 x 10%)

    Cr Interest revenue 123

    The next day, January 1, you will need to record the interest received:

    Dr Cash 123

    Cr Interest receivable 123
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