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On November 1, 2010, Alejandro Corporation purchased $300,000 of Beluga Corporation's 5%, 10-year bonds payable. Interest is payable on April 30 and October 31. Alejandro's year-end is December 31. Alejandro uses the straight-line method to amortize and bond discounts or premiums.
-If the bonds were purchased at face value, how much bond interest revenue should Alejandro recognize in 2010?

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Use the following information to answer questions 
On November 1, 2010, Alejandro Corporation purchased $300,000 of Beluga Corporation's 5%, 10-year bonds payable. Interest is payable on April 30 and October 31. Alejandro's year-end is December 31. Alejandro uses the straight-line method to amortize and bond discounts or premiums.
-If the bonds were purchased at face value, how much bond interest revenue should Alejandro recognize in 2010?

Quizplus · Accepted Answer

Alejandro would recognize two months of interest revenue for November and December. The annual interest is $15,000 ($300,000 * 5%), so for two months, it would be $2,500 ($15,000 * 2/12).

Use the Following Information to Answer Questions