Question

Assume that on April 1, Jerome, Inc., paid $100,000 to buy Potter's 8 percent, two-year bonds with a $100,000 par value. The bonds pay interest semiannually on March 31 and September 30. Jerome intends to hold the bonds until they mature.

Required:
Write down the journal entry.

Answer 1

Dr Potter's 8% Bonds $100,000

Cr Cash $100,000

Dr Cash $4,000

Cr Interest income $4,000

Step-by-step explanation:

Based on the information given the appropriate journal entry will be:

Dr Potter's 8% Bonds $100,000

Cr Cash $100,000

(Being 8% Bonds purchased)

Dr Cash $4,000

Cr Interest income $4,000

($100,000*8%*1/2)

(To record semi annual interest receipt)