Five Percent Bonds with a Total Face Value of $12,000

question 64

Multiple Choice

Five percent bonds with a total face value of $12,000 were purchased at par during the year.The last interest payment for the year was received on July 31.The bonds pay interest semiannually.The adjusting entry at December 31 would include a

• A) debit to interest revenue of $600.
• B) debit to interest revenue of $250.
• C) credit to interest revenue of $300.
• D) credit to interest revenue of $250.

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Definitions:

Interest Receivable

The amount of interest that has been earned but not yet received in cash or other forms of payment.

Interest Revenue

Income earned from lending money or investing in interest-bearing financial instruments.

Accrued Interest

Interest that has been earned but not yet received or recorded in the accounts.

Interest Payable

A liability account showing the amount of interest expense that has been incurred but not yet paid as of the balance sheet date.