Question

If Intervale Railway invests​ $100,000 in​ 5% bonds at face value that the company intends to hold until the bond maturity​ date, the interest revenue recognized when each semiannual interest payment is received would be recorded as a A. credit to Interest​ Revenue, $2,500. B. debit to​ Held-to-Maturity Debt​ Investments, $2,500. C. debit to Dividend​ Revenue, $2,500. D. credit to​ Cash, $2,500.

Answer 1

A. credit to Interest​ Revenue, $2,500.

Step-by-step explanation:

In accounting, interest revenue from bond is recognized and recorded in the period in which they are earned, not until the maturity date of the bond, based on the matching principle.

The compete entry for the interest revenue when each is received is therefore as follows:

Debit Cash with $2,500

Credit Interest​ Revenue with $2,500