On January 1, 2017, Dooley Company purchases $80,000, 5% bonds at a price of 86.4 and a maturity date of January 1, 2027. Dooley Company intends to hold the bonds until their maturity date. Interest is paid semiannually, on January 1 and July 1. Dooley Company has a calendar year end. The entry for the receipt of interest on July 1, 2017 is:

Question

Quizplus · Accepted Answer

The semiannual interest payment is calculated as $80,000 (face value) * 5% (annual interest rate) / 2 = $2,000. Therefore, the entry is to debit Cash for $2,000 and credit Interest Revenue for $2,000.

On January 1, 2017, Dooley Company Purchases $80,000, 5% Bonds