Question

Melina purchased a $10,000 corporate bond on July 1, 2018. The bond has a stated interest rate of 5%, payable annually on November 1. Since Melina purchased the bond between interest payment dates, how does she report the interest income on Schedule B, Interest and Ordinary Dividends?

Answer 1

$250

Step-by-step explanation:

Answer 2

$291.67

Step-by-step explanation:

Total Interest Receivable on Bond for one year = ($10,000 x 0.05) = $500

For Reporting purpose on July 1, 2019:

Interest Received on Bond (Income) = ($10,000 x 0.05) x (5/12) = $208.33

Interest Receivable on Bond (Current Asset) = ($10,000 x 0.05) x (7/12) = $291.67