On January 1,2014,Pale Company purchased as an investment a $1,000,7% bond for $760.Pale plans to hold the bond until the maturity date on January 1,2024.The bond pays interest on January 1 and July 1.The company's fiscal year ends on December 31.The entries on December 31,2014 would include a:

Question

Quizplus · Accepted Answer

Since the bond pays interest on January 1 and July 1, the interest for the six months ending on December 31, 2014, has been earned but not yet received. Therefore, Pale Company will debit Interest Receivable for $35 (calculated as 6/12 x $1,000 x 7%) and credit Interest Revenue. There is no entry required for the Held-to-Maturity Investment in Bonds account at this time.

On January 1,2014,Pale Company Purchased as an Investment a $1,000,7