On January 1 2017 Brenner Company purchased at face value a $1000 8% bond that pays interest on January 1. Brenner Company has a calendar year end. The adjusting entry on December 31 2017 is
a. not required.
b.
$\begin{array}{llr}
\text { Cash } &80\
\text { Interest Revenue } &&80\
\end{array}$

c.
$\begin{array}{llr}
\text { Interest Receivable } &80\
\text { Interest Revenue} &&80\
\end{array}$

d.
$\begin{array}{llr}
\text { Interest Receivable } &80\
\text { Debt Investments } &&80\
\end{array}$

Question

On January 1 2017 Brenner Company purchased at face value a $1000 8% bond that pays interest on January 1. Brenner Company has a calendar year end. The adjusting entry on December 31 2017 is
a. not required.
b. 
$\begin{array}{llr}
  \text { Cash } &80\
 \text {  Interest Revenue } &&80\
\end{array}$

c. 
$\begin{array}{llr}
  \text { Interest Receivable } &80\
 \text {   Interest Revenue} &&80\
\end{array}$

d. 
$\begin{array}{llr}
  \text { Interest Receivable } &80\
 \text { Debt Investments } &&80\
\end{array}$

Quizplus · Accepted Answer

The adjusting entry is required to record the accrued interest revenue for the period from January 1 to December 31, 2017. Since the bond pays interest on January 1, 2017, the company has earned 8% of $1000, or $80, of interest revenue for the year. Therefore, the entry should be to debit Interest Receivable for $80 and credit Interest Revenue for $80.

On January 1 2017 Brenner Company Purchased at Face Value Cash 80 Interest Revenue 80\begin{array}{llr} \text { Cash } &80\\ \text { Interest Revenue } &&80\\\end{array} Cash Interest Revenue ​80​80​

On January 1 2017 Brenner Company Purchased at Face Value $\begin{array}{llr} \text { Cash } &80\\ \text { Interest Revenue } &&80\\\end{array}$