Debra Technologies invests $50,000 to acquire $50,000 face value, 10%, five-year

Question

Debra Technologies invests $50,000 to acquire $50,000 face value, 10%, five-year corporate bonds on December 31, 2010. The bonds will mature on December 31, 2015. The bonds pay interest semiannually on December 31 and June 30 every year until maturity. Assume Debra Technologies uses a calendar year. Based on the information provided, which of the following will be included in the journal entry for the transaction on December 31, 2014?

A. a debit to Interest Revenue for $2,500

B. a credit to Interest Revenue for $2,500

C. a debit to Interest Revenue for $5,000

D. a credit to Interest Revenue for $5,000

Explanation / Answer

Answer : B. a credit to Interest Revenue for $2,500

=> The Journal entry for receipt of half year interest on bond $50000 @ 10% per annum on December 31, 2014 is

Debit Cash $2500

Credit Interest Revenue $2500

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