Barnes Company purchased $50,000 of 8% bonds at par.The bonds mature in six years and are classified as a held-to-maturity security.Which of the following is the correct journal entry to record the receipt of the usual semiannual interest payment?
A)debit Cash,$4,000; credit Long-Term Investments-HTM,$4,000.
B)debt Cash,$2,000; credit Long-Term Investments-HTM,$2000.
C)debit Cash,$2,000; credit Interest Revenue,$2,000.
D)debit Unrealized Gain-Equity,$2,000; credit Cash,$2,000.
E)debit Cash,$4,000; credit Unrealized Gain-Equity,$4,000.

Question

Quizplus · Accepted Answer

When a company owns held-to-maturity securities, they are recorded at cost and subsequently adjusted for amortization of premium or discount and for any impairment. The interest income received on held-to-maturity securities should be recorded as interest revenue. Therefore, the correct entry to record the receipt of the usual semiannual interest payment is to debit Cash for $2,000 and credit Interest Revenue for $2,000.

Barnes Company Purchased $50,000 of 8% Bonds at Par