The adjusting entry (if any)required on December 31,Year 1,related to this bond issue involves:
A)Recognition of interest expense of $1,000,000.
B)Recognition of interest expense of $500,000.
C)A credit to Interest Payable of $2,000,000.
D)A credit to Cash of $500,000.

Question

Quizplus · Accepted Answer

The adjusting entry on December 31, Year 1, would involve recognizing the interest expense that has accrued over the period. If the bond pays interest semi-annually and the interest expense for the period is $500,000, then that amount should be recognized as an expense.

The Adjusting Entry (If Any)required on December 31,Year 1,related to This