Reed Company acquires 80 Holmes 10%, 5 year, $1,000 bonds on January 1, 2012 for
ID: 2505299 • Letter: R
Question
Reed Company acquires 80 Holmes 10%, 5 year, $1,000 bonds on January 1, 2012 for $82,000. This includes a brokerage commission of $2,000. Assume Holmes pays interest semiannually and the July 1 entry was done correctly. The journal entry at December 31, 2012 would include a credit to A. Interest Receivable for $4,000. B. Interest Revenue for $8,000. C. Accrued Expense for $8,000. D. Interest Revenue for $4,000. Reed Company acquires 80 Holmes 10%, 5 year, $1,000 bonds on January 1, 2012 for $82,000. This includes a brokerage commission of $2,000. Assume Holmes pays interest semiannually and the July 1 entry was done correctly. The journal entry at December 31, 2012 would include a credit to A. Interest Receivable for $4,000. B. Interest Revenue for $8,000. C. Accrued Expense for $8,000. D. Interest Revenue for $4,000.Explanation / Answer
Interest Revenue = 80*(10/100)*1000*0.5 = $ 4000
so ans is D) Interest Revenue for $4,000.
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