Ban Co. purchased 50, 5% Waylan Company bonds for $50,000 cash plus brokerage fees of $500. Interest is payable semiannually on July 1 and January 1. The entry to record the December 31 interest accrual would include a

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The bond was purchased for $50,000, which is the principal amount of the bond. The bond pays 5% interest, or $2,500 per year ($50,000 x 5%). Since interest is payable semiannually, the amount of interest to be accrued at December 31 is half of the annual interest payment, or $1,250 ($2,500 / 2). The entry to record the accrual of interest would be a debit to Interest Receivable for $1,250 and a credit to Interest Revenue for $1,250. The brokerage fees of $500 would be added to the cost of the investment and recorded as part of the investment's cost.

Ban Co Purchased 50, 5% Waylan Company Bonds for $50,000 Cash