Daniel purchased a bond on July 1,2010,at par of $10,000 plus accrued interest of $400.On December 31,2010,Daniel collected the $800 interest for the year.On January 1,2011,Daniel sold the bond for $10,200.

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Daniel must recognize $400 interest income for 2010 because he purchased the bond on July 1, 2010, and the interest payment date is December 31, 2010. He must also recognize a $200 gain on the sale of the bond in 2011 because he sold the bond for $10,200, which is $200 more than the par value of $10,000.

Daniel Purchased a Bond on July 1,2010,at Par of $10,000