Asked by Moses Amoxx on Jun 25, 2024
Verified
When bonds are purchased between interest dates, the accrued interest should be
A) debited to Interest Receivable
B) debited to Interest Revenue
C) debited to Investment in Bonds
D) either a or b
Interest Dates
The specific dates on which interest payments on a debt or investment are made to bondholders or lenders.
Accrued Interest
Interest that has been earned but not yet received or recorded as of a specific date, often related to bonds or loans.
Investment in Bonds
Purchasing debt securities issued by corporations or governments to earn interest income and potentially benefit from bond price appreciations.
- Recognize the importance and method of initial investment recording at cost.
Verified Answer
NA
NUR AMIZA SYAZWINA BINTI AZMI / UPMJun 27, 2024
Final Answer :
D
Explanation :
When bonds are purchased between interest dates, the buyer owes the seller for the interest accrued from the last interest payment date to the purchase date. This amount is typically debited to Interest Receivable if the buyer expects to receive the full interest amount on the next interest payment date, or to Interest Revenue if the buyer is accounting for the accrued interest as income. Thus, either approach (A or B) can be correct depending on the accounting policy of the buyer.
Learning Objectives
- Recognize the importance and method of initial investment recording at cost.