Barnes Company purchased $62,000 of 11.0% bonds at par. The bonds mature in six years and are classified as a held-to-maturity security. Which of the following is the correct journal entry to record the receipt of the usual semiannual interest payment?

(A) debt Cash, $4,715; credit Long-Term Investments—HTM, $4,715.
(B) debit Cash, $9,430; credit Long-Term Investments—HTM, $9,430.
(C) debit Cash, $4,715; credit Interest Revenue, $4,715.
(D) debit Cash, $9,430; credit Unrealized Gain-Equity, $9,430.
(E) debit Unrealized Gain-Equity, $4,715; credit Cash, $4,715.

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Dryomys Dryomys · Answer 1 · 2020-02-26T06:46:29+01:00

Answer:

Given that,

Value of bonds purchased = $62,000

Interest rate = 11 percent

Bonds are issued at par.

Interest Amount = Value of bonds purchased × (Interest rate ÷ 2)

= $62,000 × (11% ÷ 2)

= $62,000 × 5.5%

= $3,410

Therefore, the journal entry is as follows:

Cash A/c Dr. $3,410

To interest revenue A/c $3,410

(To record the receipt of the usual semiannual interest payment)