Seamark buys $300,000 of Eider's 8% five-year bonds payable at par value on September 1.Interest payments are made semiannually on March 1 and September 1.The journal entry to accrue interest earned at year-end December 31 is:

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The bond is worth $300,000 and has an 8% coupon rate, meaning that the annual interest payment is $24,000 ($300,000 x 0.08). Since interest is paid semiannually, the payment every six months is half of that, or $12,000.

Since the bond was purchased on September 1, interest was earned for four months for the period ending December 31 (September 1 to December 31). Therefore, the interest earned would be $8,000 ($12,000 x 4/12).

To accrue this interest at year-end, we would debit Interest Receivable $8,000 and credit Interest Revenue $8,000, reflecting the fact that the company has earned $8,000 in interest but has not yet received it in cash.

Seamark Buys $300,000 of Eider's 8% Five-Year Bonds Payable at Par