Asked by Abbas Ghaderi on May 19, 2024
Verified
On January 1 2017 Brenner Company purchased at face value a $1000 8% bond that pays interest on January 1. Brenner Company has a calendar year end. The adjusting entry on December 31 2017 is
a. not required.
b.
Cash 80 Interest Revenue 80\begin{array}{llr} \text { Cash } &80\\ \text { Interest Revenue } &&80\\\end{array} Cash Interest Revenue 8080
c.
Interest Receivable 80 Interest Revenue80\begin{array}{llr} \text { Interest Receivable } &80\\ \text { Interest Revenue} &&80\\\end{array} Interest Receivable Interest Revenue8080
d.
Interest Receivable 80 Debt Investments 80\begin{array}{llr} \text { Interest Receivable } &80\\ \text { Debt Investments } &&80\\\end{array} Interest Receivable Debt Investments 8080
Interest Receivable
The amount of interest that has been earned but not yet received in cash.
Interest Revenue
Income earned by an entity through investments in interest-bearing financial instruments or accounts.
Debt Investments
Financial assets purchased with the expectation that the loan made to the issuer (such as bonds) will be paid back with interest.
- Comprehend the accounting processes for investment income, such as dividends and interest.
Verified Answer
DS
Danielle SmithMay 21, 2024
Final Answer :
C
Explanation :
The adjusting entry is required to record the accrued interest revenue for the period from January 1 to December 31, 2017. Since the bond pays interest on January 1, 2017, the company has earned 8% of $1000, or $80, of interest revenue for the year. Therefore, the entry should be to debit Interest Receivable for $80 and credit Interest Revenue for $80.
Learning Objectives
- Comprehend the accounting processes for investment income, such as dividends and interest.
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