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21 March, 08:22

A company holds $40,000 of 7% bonds as a held-to-maturity security. Assuming all prior interest entries have been accounted for, the bondholder's journal entry to record receipt of the semiannual interest payment includes a debit to Cash for $2,800 and a credit to Interest Revenue for $2,800. True False

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  1. 21 March, 08:33
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    False

    Explanation:

    Since the maturity amount is $40,000 and the interest rate is 7%

    So, the receipt of the semiannual interest payment would be

    = Maturity amount * interest rate

    = $40,000 * 7% : 2

    = $1,400

    Since the interest payment is semi-annual so we divide the interest rate by 2 and if the time period is given so we double it.

    Hence, the given statement is false
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