On January 1, 2014, Bregeut Company, a calendar year corporation, purchased 900 of the $1,000 face value, 9% bonds of Clariant Incorporated, for CHF900,000. The bonds, which mature on January 1, 2019, pay interest semiannually on July 1 and January 1. The December 31, 2014 adjusting entry for the bonds on Bregeut's books will include

Question

Quizplus · Accepted Answer

The bonds pay 9% interest annually, which is CHF81,000 (900 bonds x CHF1,000 x 9%). Since interest is paid semiannually, each payment is CHF40,500. The adjusting entry on December 31, 2014, would recognize the interest earned but not yet received, which is a credit to Interest Revenue for CHF40,500.

On January 1, 2014, Bregeut Company, a Calendar Year Corporation