On January 1,2014,Winston Company purchased 6% bonds with a face value of $50,000 for par.Winston Company intends to hold the bonds until maturity.Interest is payable semiannually on July 1 and January 1.The company's fiscal year ends on December 31.The journal entry on December 31,2014 is:

Question

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On December 31, 2014, Winston Company has earned six months of interest on the bonds. The interest receivable account should be debited for the amount of interest earned and not yet received, which in this case is $1,500 ($50,000 x 6% x 6/12). The interest revenue account should be credited for the same amount because the interest has been earned but not yet recognized. There is no need to adjust the held-to-maturity investment account because it is recorded at cost and not subject to changes in fair value. Therefore, options A and D are incorrect. Option B is incorrect because it assumes that Winston Company received the interest.

On January 1,2014,Winston Company Purchased 6% Bonds with a Face