Leonard Technologies invests $54,000 to acquire $54,000 face value, 10%, five-year corporate bonds on December 31, 2014. The bonds will mature on December 31, 2019. The bonds pay interest semiannually on December 31 and June 30 every year until maturity. Assume Leonard Technologies uses a calendar year. Based on the information provided, which of the following will be included in the journal entry for the transaction on December 31, 2018?

A. a debit to Interest Revenue for $5,400

B. a credit to Interest Revenue for $2,700

C. a debit to Interest Revenue for $2,700

D. a credit to Interest Revenue for $5,400

Question

Business

Hope Hooper

8 November, 14:28

Leonard Technologies invests $54,000 to acquire $54,000 face value, 10%, five-year corporate bonds on December 31, 2014. The bonds will mature on December 31, 2019. The bonds pay interest semiannually on December 31 and June 30 every year until maturity. Assume Leonard Technologies uses a calendar year. Based on the information provided, which of the following will be included in the journal entry for the transaction on December 31, 2018?

A. a debit to Interest Revenue for $5,400

B. a credit to Interest Revenue for $2,700

C. a debit to Interest Revenue for $2,700

D. a credit to Interest Revenue for $5,400

+4

Answers (1)

Know the Answer?

Quinn Hicks · Answer 1

B. a credit to Interest Revenue for $2700

Explanation:

The interest earned from Bonds receivable is recorded as an interest revenue. The 10% rate of interest given is an annual rate and as the interest is paid semi annually so the semi annual interest payment received is of,

Semi annual interest revenue = 54000 * 0.1 * 6/12 = $2700

Thus, on 31 December 2018, Leonard will record a debit to the cash for $2700 and a credit to the interest revenue for $2700.