Question

Assume that on July 1, Jerome, Inc., paid $100,000 to buy Potter's 8 percent, two-year bonds with a $100,000 par value. The bonds pay interest semiannually on December 31 and June 30. Jerome intends to hold the bonds until they mature.

Complete the necessary December 31 entry to record receipt of interest by selecting the account names from the pull-down menus and entering dollar amounts in the debit and credit columns.

Answer 1

On July, 1 (For Bonds purchased):

Potter's 8% Bonds A/c Dr 100000

To Cash A/c 100000

(Being 8% Bonds purchased)

On December, 31 (On Interest Receipt):

Cash A/c Dr 4000

To Interest from Bonds A/c 4000

(Being Interest received on 8% Bonds)